UNIVERSITY  OF  CALIFORNIA 
AT   LOS  ANGELES 


GIFT  OF 


18 


CENTRAL-STATION   ELECTRIC  SERVICE 


>^imuj  5n*cJP 

»nd  Companion  of  ma 


l^o« 


CENTRAL-STATION 

ELECTRIC  SERVICE 


ITS  COMMERCIAL  DEVELOPMENT  AND 

ECONOMIC    SIGNIFICANCE   AS   SET   FORTH    IN 

THE  PUBLIC  ADDRESSES  (l  897-1 91 4)  OF 

SAMUEL  INSULL 

FELLOW   OF  THE   AMERICAN   INSTITUTE 

OF   ELECTRICAL    ENGINEERS,    MEMBER  OF   THR 

(BIUTISH)   INSTITUTION    OF   ELECTRICAL   ENGINEERS, 

MEMBER   OF  THE   FRANKLIN     INSTITUTE,    PAST-PRESIDENT   OF 

THE  NATIONAL  ELECTRIC   LIGHT  ASSOCIATION,  PA8T- 

FHBSIDENT   OF  THE   ASSOCIATION   OF   EDISON 

ILLUMINATING  COMPANIES,   ETC. 


EDITED,  WITH  AN  INTRODUCTION,  BY 
WILLIAM    EUGENE    KEILY 


ASSOCIATE   OF   TUB   AMERICAN   INSTITUTE 
OF  ELECTRICAL    ENGINEERS,    ETC. 


ILLUSTRATED 


CHICAGO 

PRIVATELY  PRINTED 
1915 


One  thousand  one  hundred  and 
twenty  copies  of  this  book  have 
been  printed  for  private  circulation. 

This  copy  is  No.  ^ 

and  is  presented  by  Mr.  Insull  to 


COPYRIGHT,  1915,  BT  SAMUEL  INHULL 


\V2>\ 


TO 
MY  MOTHER 

IN    GRATEFUL    RECOGNITION    OF 

HER    AFFECTIONATE    AND 
SYMPATHETIC   ENCOURAGEMENT 

S.  I. 


1T 

4* 


238529 


CONTENTS 

Page 

FOREWORD xv 

EDITOR'S  INTRODUCTION xvii 

EARLY  WORK  WITH  EDISON xxv 

AN  INTIMATE  PERSONAL  OPINION  OF  THE  PROSPECTS  OF 
THE  ELECTRIC  LIGHT  IN  1881  FROM  EDISON'S  YOUTH- 
FUL PRIVATE  SECRETARY xxxv 

ADDRESSES  OF  SAMUEL  INSULL 

PROBLEMS  OF  THE  EDISON  CENTRAL-STATION  COM- 
PANIES IN  1897 1 

THE  DEVELOPMENT  OF  THE  CENTRAL  STATION     ...       8 

STANDARDIZATION,  COST  SYSTEM  OF  RATES,  AND  PUBLIC 
CONTROL 34 

POSSIBILITIES  OF  THE  CENTRAL-STATION  BUSINESS     .      .     48 

ELUCIDATION  OF  ELECTRIC-SERVICE  RATES  FOR  BUSINESS 
MEN 54 

CITY  CLUB  DISCUSSION  OF  THE  21,000-KiLowATT  CON- 
TRACT WITH  THE  CHICAGO  CITY  RAILWAY  COMPANY  65 

THE  LARGER  ASPECTS  OF  MAKING  AND  SELLING  ELEC- 
TRICAL ENERGY 73 

PRODUCTION  AND  SALE  OF  ELECTRICAL  ENERGY  IN 
CHICAGO 97 

THIRTY  YEARS  OF  ELECTRICAL  DEVELOPMENT  — 1879- 
1909 103 

"SELL  YOUR  PRODUCT  AT  A  PRICE  WHICH  WILL  ENABLE 
You  TO  GET  A  MONOPOLY" 116 

THE  OBLIGATIONS  OF  MONOPOLY  MUST  BE  ACCEPTED     .   118 

PRESENTATION  OF  THE  EDISON  MEDAL  TO  ELIHU  THOM- 
SON   123 

vii 


viii  CONTENTS 

Page 

MASSING  OF  ENERGY  PRODUCTION  AN  ECONOMIC  NECES- 
SITY     127 

TWENTY-FIVE  YEARS  OF  CENTRAL-STATION  COMMERCIAL 

DEVELOPMENT 144 

EMPLOYEES  URGED  TO  STUDY  ECONOMIC  QUESTIONS.      .   158 
SELLING  OF  ELECTRICITY  IN  LONDON  AND  CHICAGO  COM- 
PARED       167 

"SATISFY  YOUR  CUSTOMERS" 174 

RELATIONS    OF    THE    PUBLIC    TO    THE    PUBLIC-SERVICE 

CORPORATIONS 182 

VALUE    OF    COMPANY-SECTION    ORGANIZATION    IN    THE 
NATIONAL  ELECTRIC  LIGHT  ASSOCIATION    .      .      .      .189 

THE  FINAL  TEST  OF  WELFARE  WORK 193 

THE  NECESSITY  OF  THE  APPRAISAL  OF  PUBLIC-UTILITY 

PROPERTIES ..,•*     .      .    197 

CANADIAN  ELECTRIC-SERVICE  PROBLEMS  DISCUSSED  ON 

CORONATION  DAY         199 

DUPLICATION  OF  PRODUCTION  is  ECONOMIC  WASTE  .      .  206 
DINNER  IN  HONOR  OF  MESSRS.  S.  Z.  DE  FERRANTI,  C.  H. 
MERZ,  AND  ARTHUR  WRIGHT,  OF  LONDON.      .      .      .  215 

OPPORTUNITY  FOR  ADVANCEMENT 234 

CAREERS  OF  Two  ELECTRICAL  MEN 241 

A  CERTAIN  HOSTILITY  TO  PUBLIC-SERVICE  CORPORATIONS  243 

THE  NAME  OF  EDISON  A  TALISMAN 249 

THE  RELATION  OF  CENTRAL-STATION   GENERATION  TO 

RAILROAD  ELECTRIFICATION .   255 

DISCUSSION  FOLLOWING  THE  ADDRESS  ON  "THE  RELATION 
OF    CENTRAL-STATION    GENERATION    TO    RAILROAD 

ELECTRIFICATION" 308 

A   QUARTER-CENTURY    CENTRAL-STATION    ANNIVERSARY 

CELEBRATION  IN  CHICAGO 316 

SUPPLYING  THE  ENERGY  REQUIREMENTS  OF  THE  COM- 
MUNITY     338 

STEPPING  STONES  OF  CENTRAL-STATION  DEVELOPMENT 

THROUGH  THREE  DECADES .     .   342 

THE  PRODUCTION  AND  DISTRIBUTION  OF  ENERGY     .      .      .   357 
INFLUENCE  OF  ENGINEERING  ON  MODERN  CIVILIZATION  392 


CONTENTS  ix 

Page 

POSSIBILITIES  OF  UNIFIED  ELECTRICITY  SUPPLY  IN  THE 

STATE  OF  ILLINOIS 399 

BROAD  QUESTIONS  OF  PUBLIC  POLICY 405 

PRESENT    AND    FUTURE    DISTRIBUTION    OF    ELECTRICAL 

ENERGY 414 

ELECTRICAL  SECURITIES 427 

CENTRALIZATION  OF  ENERGY  SUPPLY 445 

INDEX  .   477 


ILLUSTRATIONS 

Page 

PORTRAIT  OF  THOMAS  A.  EDISON Frontispiece 

FACSIMILE  PAGES  (REDUCED)  OF  LETTER  TO  MR.  KINGSBURY     Facing  xxxvi 

FISK  STREET  GENERATING  STATION,  CHICAGO Facing  54 

DIAGRAM  SHOWING  DECREASE  IN  COST  OF  ELECTRIC  LIGHT      ...  56 

DIAGRAM  OF  TOTAL-OUTPUT  LOAD  CURVES,  SHOWING  PEAK      ...  56 

DIAGRAM  SHOWING  RELATIVE  COST  OF  ELECTRIC-LIGHTING  SUPPLY     .  59 

VERTICAL  TURBO-GENERATORS  IN  FISK  STREET  STATION      .       Facing  74 

DIAGRAM  GIVING  ANALYSIS  OF  COST  OF  PRODUCTION 77 

DIAGRAM  OF  RAILWAY  RATE  AT  DIFFERENT  LOAD  FACTORS      ...  80 

DIAGRAM  OF  MONTHLY  LOAD  FACTORS 82 

DIAGRAM  OF  ANNUAL  LOAD  FACTORS,  CHICAGO,  1909 83 

DIAGRAM  —  STUDY  OF  DIVERSITY  OF  DEMAND 86 

DIAGRAM  —  ACTUAL  CONDITIONS  OF  DIVERSITY 88 

DIAGRAM  OF  VARIATION  IN  MAXIMA 89 

QUARRY  STREET  GENERATING  STATION,  CHICAGO   ....       Facing  104 

DIAGRAM  OF  CHICAGO  DIVERSITY  FACTOR,  1909-1910 131 

DIAGRAM    SHOWING    POSSIBILITIES    OF    CHICAGO    ELECTRIC    SERVICE, 

1909 133 

BOILER  ROOM  IN  QUARRY  STREET  STATION Facing  148 

TURBO-GENERATOR  ROOM  IN  QUARRY  STREET  STATION  .     .       Facing  162 
DINNER  IN  HONOR  OF  MESSRS.  S.  Z.  DE  FERRANTI,  C.  H.  MERZ,  AND 

ARTHUR  WRIGHT Facing  215 

GROUNDS  OF  THE  NORTHWEST  GENERATING  STATION,  CHICAGO    Facing  236 

BOILER  ROOM  AT  NORTHWEST  STATION Facing  244 

DIAGRAM  OF  NEW  YORK  TOTAL  LOAD 260 

DIAGRAM  OF  NEW  YORK  LIGHT-AND-POWER  LOAD 261 

DIAGRAM  OF  NEW  YORK  RAILWAY  LOAD 262 

DIAGRAM  OF  NEW  YORK  RAILROAD  LOAD 263 

DIAGRAM  OF  BOSTON  TOTAL  LOAD 265 

DIAGRAM  OF  CHICAGO  TOTAL  LOAD 267 

DIAGRAM  OF  CHICAGO  RAILWAY  LOAD 270 

DIAGRAM  OF  ASSUMED  CHICAGO  RAILROAD  LOAD 271 

DIAGRAM  OF  CHICAGO  ANNUAL  LOAD  FACTORS,  1912 272 

MAP  OF  NEW  YORK  POWER-TRANSMISSION  SYSTEMS 274 

MAP  OF  NEW  YORK  SYSTEMS  IF  UNIFIED 275 

DIAGRAM  OF  CHICAGO  DAILY  LOAD  FACTORS 276 

xi 


xii  ILLUSTRATIONS 

Page 

DIAGRAM  OF  BOSTON  DAILY  LOAD  FACTORS 278 

DIAGRAM  COMPARING  CHICAGO  AND  NEW  YORK  LOAD  CURVES  .  .  280 

DIAGRAM  COMPARING  CHICAGO  AND  BOSTON  LOAD  CURVES  ...  282 

MAP  OP  CHICAGO  RAILROAD  TERMINALS 283 

MAP  OP  CHICAGO  TERMINALS  ELECTRIFIED  BY  GROUPS 284 

MAP  OP  CHICAGO  TERMINALS  ELECTRIFIED  FROM  ONE  SOURCE  .  .  285 
DIAGRAM  OF  CHICAGO  FREIGHT  AND  SWITCHING  REQUIREMENTS  FOR 

A  MONTH 286 

DIAGRAM  OF  CHICAGO  FREIGHT  REQUIREMENTS  FOR  A  YEAR  .  .  .  287 

DIAGRAM  OF  CHICAGO  PASSENGER  REQUIREMENTS  FOR  A  MONTH  .  .  288 

DIAGRAM  OF  CHICAGO  PASSENGER  REQUIREMENTS  FOR  A  YEAR  .  .  289 

DIAGRAM  SHOWING  COLD- WEATHER  REQUIREMENTS 289 

DIAGRAM  SHOWING  MONTHLY  VARIATION  IN  REQUIREMENTS  ...  290 

DIAGRAM  ILLUSTRATING  SWING  MAXIMUM 290 

FACSIMILE  (REDUCED)  OF  TELEGRAM  FROM  MR.  EDISON  ....  317 

EDISON  LABORATORY  AT  MENLO  PARK Facing  318 

EDISON  HEADQUARTERS  IN  NEW  YORK  IN  1881  ....  Facing  318 

EARLY  CENTRAL  STATION  IN  MILAN  . Facing  318 

EDISON  MACHINE  WORKS  IN  NEW  YORK,  1881  ....  Facing  318 

INCANDESCENT  LAMP  OF  1882 Facing  318 

EARLY  TYPE  OF  ELECTRIC-LIGHTING  FIXTURE  ....  Facing  318 

EARLY  EDISON  DYNAMOS Facing  319 

APPLETON  (Wis.)  CENTRAL  STATION  OF  1882 Facing  319 

INTERIOR  OF  PEARL  STREET  STATION,  NEW  YORK,  IN  1882  Facing  319 

ORIGINAL  EDISON  BUILDING,  ADAMS  STREET,  CHICAGO  .  .  Facing  320 

ORIGINAL  THREE- WIRE  SWITCHBOARD  IN  ADAMS  STREET  STATION  .Facing  320 

DYNAMO  ROOM  IN  ADAMS  STREET  STATION 320B 

ENGINE  ROOM  IN  ADAMS  STREET  STATION 320B 

HARRISON  STREET  STATION,  CHICAGO 320C 

INTERIOR  OF  HARRISON  STREET  STATION 320C 

SWITCHBOARD  IN  ADAMS  STREET  STATION Facing  321 

TWENTY-SEVENTH  STREET  STATION,  CHICAGO Facing  321 

NORTH  CLARK  STREET  STATION,  CHICAGO    .     .     .     .     .     .       Facing  321 

INTERIOR  OF  NORTH  CLARK  STREET  STATION  .  .  .  .  .  "  Facing  321 

ROTARY  CONVERTERS  OF  1897 Facing  321 

DIAGRAM  OF  CHICAGO  CENTRAL-STATION  BUSINESS,  1888-1900  .  .  .  322 

RELATIVE  SIZE  AND  OUTPUT  OF  GENERATING  UNITS 323 

DIAGRAM  OF  MAXIMUM-KILOWATT  OUTPUT,  CHICAGO 323 

DIAGRAM  OF  CHICAGO  CENTRAL-STATION  BUSINESS,  1898-1911  .  .  .  325 

DIAGRAM  OF  LIGHTING  RATES  FOR  VARIOUS  HOURS'  USE  ....  326 

CHART  SHOWING  GRAPHICALLY  REDUCTION  IN  COST  OF  ELECTRICITY  327 
FACSIMILE  BILLS  (REDUCED)  FOR  SAME  AMOUNT  OF  ENERGY  IN  1892 

AND  1912 327 

GRAPHICAL  REPRESENTATION  OF  CHICAGO  CENTRAL-STATION  GROWTH  328 


ILLUSTRATIONS  xiii 

Page 

DIAGRAM  SHOWING  DISTRIBUTION  OF  EARNINGS 329 

DIAGRAMMATIC  REPRESENTATION  OP  RELATIVE  INCOMES  OF  CHICAGO 

PUBLIC-SERVICE  COMPANIES 329 

EDISON  ELECTRIC  RAILWAY,  MENLO  PARK,  1882    ....       Facing  330 

ELECTRIC  LOCOMOTIVE  OF  1912 Facing  330 

FIRST  STORAGE  BATTERY  AT  ADAMS  STREET  STATION      .     .       Facing  331 

ORIGINAL  FISK  STREET  TURBO-GENERATOR Facing  331 

NORTHWEST  STATION  AS  PLANNED  IN  1910 Facing  331 

VERTICAL     20,000-KiLOWATT     TURBO-GENERATORS     IN     NORTHWEST 

STATION Facing  338 

TYPICAL  SUBSTATIONS  IN  CHICAGO Facing  354 

MAP  OF  LAKE  COUNTY,  ILL.,  IN  1910 359 

MAP  OF  LAKE  COUNTY  IN  1912 360 

SKETCH  MAP  OF  RURAL  DISTRIBUTION  SYSTEM 360 

DIAGRAM  SHOWING  USE  OF  ELECTRICITY  ON  FARMS 361 

DIAGRAM  OF  TYPICAL  FARM  LOADS 362 

DIAGRAM  SHOWING  BENEFIT  OF  UNIFIED  CONTROL 364 

DIAGRAM  OF  LIGHT-AND-POWER  LOADS  IN  ILLINOIS 367 

DIAGRAM  OF  RAILWAY  LOADS  IN  ILLINOIS 368 

DIAGRAM  OF  WATER-PUMPING  LOADS 369 

DIAGRAM  OF  ICE-MAKING  LOADS 370 

MAP  OF  ILLINOIS  RIVER  DRAINAGE  DISTRICTS 371 

MAP  (DETAIL)  OF  DRAINAGE  DISTRICTS 372 

DIAGRAM  OF  DRAINAGE-DISTRICT  CHARACTERISTICS 373 

DIAGRAM  OF  ESTIMATED  LOAD  FOR  DRAINAGE 374 

DIAGRAM  OF  ESTIMATED  COAL-MINING  LOAD  IN  ILLINOIS     ....  375 

DIAGRAM  OF  ESTIMATED  RURAL  LIGHT-AND-POWER  LOAD  IN  ILLINOIS  376 

DIAGRAM  OF  TOTAL  ELECTRICAL  REQUIREMENTS  OF  ILLINOIS    .     .     .  378 

DIAGRAM  OF  ILLINOIS  TOTAL  LOAD,  UTILIZING  DIVERSITY    ....  379 

MAP  OF  ILLINOIS  SHOWING  TOWNS  WITHOUT  ELECTRIC  SERVICE    .     .  385 
MAP  OF  ILLINOIS  SHOWING  TOWNS  WITH  ELECTRIC  SERVICE  UNDEB 

LOCAL  MANAGEMENT 386 

MAP  OF  ILLINOIS  SHOWING  TOWNS  WITH  ELECTRIC  SERVICE  UNDER 

GROUP  MANAGEMENT 387 

DIAGRAM  —  ELECTRIC-SERVICE  CONDITIONS  IN  ILLINOIS 388 

INTERIOR  OF  SEDGWICK  STREET  SUBSTATION,  CHICAGO     .      .       Facing  394 
A    BOILER    ROOM    IN    THE    1914    EXTENSION     TO     FISK     STREET 

STATION Facing  402 

VIEW    IN    FISK    STREET    STATION,    SHOWING    HORIZONTAL    TURBO- 
GENERATORS   Facing  420 

DIAGRAM  SHOWING  ANNUAL  SALES  OF  ELECTRICITY  IN  CHICAGO    .     .  429 

DIAGRAM  OF  KILOWATT-HOURS  PRODUCED  AND  SOLD  IN  CHICAGO        .  430 

DIAGRAM  OF  INCOME  PER  KILOWATT-HOUR  SOLD 430 

DIAGRAM  SHOWING  AMOUNT  OF  ELECTRIC  LIGHT  ONE  DOLLAR  WOULD  BUY  431 


xiv  ILLUSTRATIONS 

Page 
DIAGRAM    GIVING    COMPARISON    OF    LIGHTING    RATES    IN    VARIOUS 

CITIES 433 

DIAGRAM  SHOWING  SOURCE  OF  CAPITAL  FOR  ADDITIONS  TO  PLANT      .  435 
DIAGRAM  SHOWING  INCOME  AND  INVESTMENT  PER  CUSTOMER    .      .      .  436 
DIAGRAM  SHOWING  RELATION  OF  COST  TO  INCOME  IN  CHICAGO     .     .  437 
DIAGRAM  OF  CHICAGO  BLOCK  OF  APARTMENTS,  ILLUSTRATING  DIVER- 
SITY FACTOR 448 

DIAGRAM  SHOWING  DIVERSITY  FACTOR  OF  LARGE  CUSTOMERS  .      .     .  450 

TYPICAL  MAXIMUM-LOAD  DIAGRAM  OF  DEPARTMENT  STORES     ...  451 

TYPICAL  MAXIMUM-LOAD  DIAGRAM  OF  PUBLIC  GARAGES      ....  452 

TYPICAL  MAXIMUM-LOAD  DIAGRAM  OF  OFFICE  BUILDINGS    ....  453 
TYPICAL    MAXIMUM-LOAD    DIAGRAM    OF    STEEL,    IRON,    AND    BRASS 

WORKS 454 

TYPICAL  MAXIMUM-LOAD  DIAGRAM  OF  MISCELLANEOUS  MANUFACTURERS  455 
TYPICAL    MAXIMUM-LOAD    DIAGRAM    OF    STOCKYARDS    AND    PACKING 

INDUSTRIES 456 

TYPICAL  MAXIMUM-LOAD  DIAGRAM  OF  TELEPHONE  EXCHANGES      .     .  456 

TYPICAL  MAXIMUM-LOAD  DIAGRAM  OF  ICE  MANUFACTURERS     .      .      .  457 

TYPICAL  MAXIMUM-LOAD  DIAGRAM  OF  HOTELS 458 

TYPICAL  MAXIMUM-LOAD  DIAGRAM  OF  BRICKYARDS  AND  QUARRIES      .  458 

TYPICAL  MAXIMUM-LOAD  DIAGRAM  OF  CEMENT  WORKS,  ETC.     .      .      .  459 

DIAGRAM  SHOWING  RELATION  OF  INCOME  TO  OUTPUT 461 

DIAGRAM  OF  INCOME  AND  OUTPUT  (CENSUS) 462 

DIAGRAM  SHOWING  RATIO  OF  MOTOR  LOAD  TO  TOTAL  LOAD     ...  465 

DIAGRAM  SHOWING  DISPOSITION  OF  INCOME 466 

DIAGRAM  SHOWING  RELATION  OF  INVESTMENT  TO  OUTPUT  .  -  .     .     .  467 

DIAGRAM  OF  PER  CAPITA  SALES 468 

DIAGRAM  SHOWING  CONSERVATION  OF  COAL 469 

FINANCIAL  CHART  OF  COMMONWEALTH  EDISON  COMPANY     ....  470 

MAP  ILLUSTRATING  GROUP  OPERATION  OF  UTILITIES  IN  ILLINOIS       .  472 


FOREWORD 

Some  of  the  addresses  given  on  the  following  pages  have 
been  printed  in  pamphlet  form.  Several  months  ago,  when  the 
question  arose  of  reprinting  such  of  these  as  were  out  of  print, 
I  decided  to  go  a  step  farther  and  to  print  in  a  book,  for 
private  circulation,  a  collection  of  speeches  that  I  have  deliv- 
ered on  subjects  bearing  on  Central-Station  Electric  Service. 
The  present  volume  is  the  result  of  that  determination.  It 
is  my  hope  that  some  of  the  material  in  these  addresses  is 
worthy  of  preservation  in  a  permanent  record,  and  that  the 
studies  which  I  have  made  in  connection  with  my  own  work 
hi  the  conduct  of  central-station  enterprises  may,  if  placed 
at  the  disposal  of  students  and  younger  men  coming  into  the 
industry,  help  these  future  managers  and  executives  to  solve 
the  many  problems  with  which  they  will  have  to  deal.  I  also 
venture  to  express  the  belief  that  some  of  the  addresses  may 
be  of  use  to  the  future  historians  of  the  industry,  my  connec- 
tion with  which  I  cherish  with  what  I  trust  will  be  considered  a 
pardonable  pride. 

The  careful  reader  may  find  some  divergences  of  opinion 
in  the  text  of  this  volume.  It  should  be  borne  in  mind  that 
the  industry  is  the  development  of  but  a  few  years,  relatively, 
and  that  to  a  large  extent  those  engaged  in  it,  certainly  on  the 
commercial  side,  have  had  to  blaze  their  own  trails.  Thus,  if 
different  statements  in  my  addresses  appear  contradictory, 
the  cause  may  be  found  in  the  changes  of  opinion  which 
greater  experience  often  brings. 

It  has  been  my  good  fortune  to  be  associated  with  the  central- 
station  industry  for  more  than  a  generation,  Sunday  of  this  week 
being  the  thirty-fourth  anniversary  of  my  arrival  in  New 
York  from  England  and  of  my  entering  the  service,  as  private 

xv 


xvi  FOREWORD 

secretary,  of  the  father  of  the  industry,  Mr.  Thomas  A.  Edison, 
then  about  to  begin  the  installation  of  the  first  central  station, 
in  New  York.  Those  who  take  the  trouble  to  read  the  follow- 
ing chapters  will  find  that  the  name  of  Edison  occurs  quite 
frequently.  I  have  no  apology  to  make  for  that  fact.  For 
thirty-six  years  —  during  my  entire  career  in  this  country  and 
for  two  years  in  London  in  connection  with  Mr.  Edison's  Euro- 
pean business  —  it  has  been  my  privilege  to  serve  under  the 
banner  bearing  his  name.  For  eleven  years  —  from  March, 
1881,  to  June,  1892  —  I  had  the  great  advantage  of  intimate 
personal  association  with,  and  teaching  and  advice  from,  the 
great  inventor  whose  name  must  for  all  time  be  associated 
with  the  central-station  industry,  which  is  one  of  the  many 
monuments  to  his  genius,  resourcefulness  and  unrivaled  capa- 
city for  work.  These  remarks  may  explain  why  I  deem  it  a 
privilege  to  present  as  the  frontispiece  of  this  volume  a  repro- 
duction of  my  favorite  photograph  of  Mr.  Edison  as  a  slight 
indication  of  my  affectionate  esteem  for  the  man. 

The  literary  and  mechanical  supervision  of  the  book  has 
been  entrusted  to  my  friend  Mr.  William  Eugene  Keily,  an 
experienced  writer  on  electrical  subjects,  who  for  many  years 
has  evinced  a  sympathetic  interest  in  the  ideas  advanced  in 
these  addresses.  I  provided  Mr.  Keily  with  copies  of  all  of  the 
addresses  that  I  had  delivered  and  of  which  the  text  was  avail- 
able, and  asked  him  to  select  from  those  placed  at  his  disposal 
such  as  he  deemed  suitable  to  include  in  this  volume.  It  is 
proper  that  mention  should  be  made  also  of  the  assistance  I 
have  received  from  the  engineering  and  statistical  staff  of  the 
Commonwealth  Edison  Company  in  preparing  the  data  and 
and  curves  used  by  me  in  my  various  addresses. 

SAMUEL  INSULL. 

Chicago,  March  6,  1915. 


EDITOR'S  INTRODUCTION 

As  one  who  has  had  something  to  do  with  the  journalistic 
work  connected  with  the  development  of  the  art  and  the  in- 
dustry which  have  been  based  on  the  science  of  electricity,  it  has 
been  a  great  pleasure  to  me  to  prepare  for  the  press  the  present 
collection  of  the  public  utterances  of  Samuel  Insull.  Quite 
apart  from  any  interest  which  may  attach  to  the  personality 
of  the  man,  this  book  should  serve  a  useful  purpose.  It  should 
have  a  value  —  a  unique  value,  I  think  —  as  presenting  in  con- 
venient form  dissertations  on  the  modern  concept  of  the  eco- 
nomics of  central-station  electric  service,  not  by  one  who  has 
only  a  theoretical  knowledge  of  the  subject,  or  a  mere  academic 
interest  in  it,  but  by  one  who  has  been  intimately  concerned 
in  the  expansion  of  the  electrical  industry  for  thirty -four  years, 
and  thus  almost  from  its  very  beginning,  and  who  for  twenty- 
three  years  has  stood  in  the  first  rank  of  operators  of  electric 
central-station  properties.  The  work  should  have  a  practical 
value,  therefore,  to  those  who  would  learn  of  this  important 
subject  from  one  who  can  speak  as  the  result  of  first-hand 
experience  and  study  under  actual  conditions.  Where  else  is 
to  be  found  such  a  mass  of  practical  operating  data,  such  de- 
ductions and  exhortations,  such  pleadings  for  the  pure  gospel 
of  making  and  selling  electricity  on  sound  economic  principles? 
Where  else  is  available  a  series  of  papers  like  these  from  a  man 
whose  record  makes  him  free  of  the  right  to  speak  to  other  elec- 
trical men?  Nowhere  else  is  there  an  undertaking  of  this  pre- 
cise character.  And  so,  I  believe,  the  book  is  intrinsically 
worth  the  making. 

Obviously  it  would  be  out  of  place  in  a  book  having  the 
genesis  of  this  one  to  attempt  an  analysis  of  the  qualifications  of 
the  author  of  these  addresses.  But  there  is  no  impropriety  in 


xviii  EDITOR'S  INTRODUCTION 

considering  for  a  moment  the  place  of  the  enterpriser  —  the 
entrepreneur  of  many  economists  —  in  public-utility  work. 
What  are  the  functions  of  an  enterpriser?  This  question  may 
be  answered,  perhaps,  by  quoting  Mr.  Halford  Erickson,  a 
member  of  the  Railroad  Commission  of  Wisconsin.  Before  a 
gathering  of  electrical  men  in  June,  1914,  Mr.  Erickson  read  a 
carefully  reasoned  paper  on  "Regulation  and  Reasonable  Re- 
turns." In  the  course  of  it  the  author  expressed  himself  as 
follows : 

Business  is  now  largely  carried  on  by  enterprisers  on  bor- 
rowed capital  on  which  interest  is  paid.  *  *  *  This  con- 
dition has  led  to  the  separation  of  the  functions  of  the  capitalist 
and  the  enterpriser  or  employer  and  to  a  more  complete 
analysis  of  the  compensation  that  each  of  these  factors 
receives.  *  *  *  The  two  functions  are,  in  fact,  often  com- 
bined. *  *  *  Profits  have  their  source  in  the  business  ability, 
skill  and  foresight  of  the  enterprisers,  or  in  their  management. 
The  enterpriser  is  a  sort  of  an  economic  buffer  who  bears  the 
shock  and  often  much  of  the  loss  in  case  of  failure  and  who  also 
reaps  the  credit  and  much  of  the  profit  in  case  of  success.  To 
successfully  exercise  the  functions  of  an  enterpriser  a  high  order 
of  ability  is  required.  Such  a  man  must  have  organizing 
capacity  of  a  high  order,  be  a  good  judge  of  men  and  have  tact 
in  dealing  with  them.  He  must  have  the  command  of  financial 
resources  and  the  ability  to  plan  and  execute  commercial  and 
industrial  policies.  He  should  also  have  the  technical  knowl- 
edge that  is  required  to  adopt  the  best  methods,  outline  the 
most  economical  processes  and  to  properly  pass  upon  the  mate- 
rials and  products.  *  *  *  The  wages  of  management  must 
be  high  enough  to  encourage  men  of  the  necessary  ability  and 
skill  to  enter  the  field.  *  *  *  The  risks  involved  vary  in 
their  nature  with  variations  in  the  character  of  the  business. 
*  *  *  They  are  always  present,  however,  and  must  be 
assumed  by  every  enterpriser.  *  *  *  In  the  long  run  the 
compensation  for  risks  will  not  fall  below  the  point  at  which  a 
sufficient  number  of  enterprisers  are  found  who  are  willing  to 
assume  it. 

The  addresses  which  are  collected  in  this  book  are  the  work 
of  an  enterpriser  who  has  led  the  way  to  new  conceptions  of  the 
economic  function  of  central-station  electric  service.  The  great 
doctrines  of  concentrating  facilities  of  production  and  trans- 


EDITOR'S  INTRODUCTION  xix 

mission,  to  reduce  the  community  cost  of  making  electricity;  of 
utilizing  the  factor  of  diversity  in  demand  incident  to  the  vary- 
ing electrical  needs  of  a  whole  community  or  of  a  number  of 
communities  in  a  given  area;  of  standing  firm  for  monopoly 
in  electric  service  (but  a  monopoly  regulated  by  the  state) 
that  these  economic  benefits  may  be  obtained;  of  reducing 
rates  to  small  customers  as  well  as  large  ones  as  fast  as  the 
economies  effected  in  making  and  selling  electricity  will  permit; 
of  retaining  a  reasonable  profit,  but  no  more  than  a  reasonable 
profit,  for  private  ownership,  because  by  private  ownership 
alone,  so  far  as  experience  has  shown  up  to  the  present  time, 
can  these  economies  be  effected;  of  being  perfectly  frank  and 
open  with  the  public  and  the  public's  representatives;  of 
recognizing  that  the  faithful  and  continued  service  of  em- 
ployees is  entitled  to  more  than  a  daily  wage  for  daily  work  and 
providing  such  reserve  accumulation  that  no  deserving  em- 
ployee need  fear  want  in  his  declining  years  —  these  are  some  of 
the  principles  laid  down  in  the  speeches  gathered  in  this  volume. 
Truly,  the  electric  central-station  industry  has  made  great 
progress  since  the  days  of  a  pioneering  that  was  characterized 
alike  by  the  fine  enthusiasms  and  the  raw  crudities  of  .youth. 
It  has,  to  a  great  extent,  as  we  may  believe,  found  itself;  it 
knows  more  about  itself,  of  the  cost  of  producing  its  product 
and  of  how  to  sell  it;  it  has  passed  from  the  time  when  electric 
lighting  was  its  principal  concern  to  an  era  of  electric  service, 
when  the  proportion  of  its  energy  used  for  lighting  is  becoming 
constantly  smaller. 

But  there  is  a  still  more  important  aspect  of  the  economics 
of  electric  service.  What,  for  instance,  is  the  position  of  this 
industry  with  respect  to  the  Zeitgeist  —  the  spirit  of  the 
times?  Is  it  responsive  to  the  desire  that  the  conditions  of 
living  may  be  ameliorated  for  all  human  beings  as  far  as  things 
from  without  can  modify  those  conditions?  Do  the  men 
representative  of  this  particular  manner  of  money-making 
recognize  that  in  our  queer  social  complexities  unselfishness 
must  be  blended  with  selfishness  to  make  a  business  successful? 
Or,  if  an  antithesis  may  be  allowed,  do  they  realize  that  elec- 


xx  EDITOR'S  INTRODUCTION 

tricity  is  made  for  man  and  not  man  for  electricity?  In  the 
judgment  of  the  present  writer  a  careful  reading  of  the  col- 
lected papers  in  this  book  will  incline  one  to  the  belief  that  the 
above  questions,  broadly  interpreted,  must  be  answered  in  a 
manner  to  indicate  that  the  representative  electrical  enter- 
priser, considered  not  only  as  an  individual  but  also  as  a  type, 
may  be  regarded  as  a  man  with  a  conscience.  Perhaps  it  is 
not  fanciful  to  say  that  through  these  speeches,  but  probably 
not  in  all  cases  as  the  result  of  premeditation,  "one  increasing 
purpose  runs,"  and  that  that  purpose  is  not  alone  the  improve- 
ment of  the  electric-service  industry  but  also  the  betterment 
in  many  ways  of  those  served.  This  purpose  is  set  forth,  for 
example,  in  the  last  paragraph  of  the  Association  Island  address 
on  "Present  and  Future  Distribution  of  Electrical  Energy." 
The  author  says  in  that  place  that  one  likes  to  feel  that  he  is 
"contributing  something  to  the  progress  of  the  country  in  which 
he  lives  and  of  the  people  among  whom  he  has  his  abiding  place." 
Elsewhere  he  tells  more  fully  of  his  conception  of  cheap  elec- 
trical energy  in  every  hamlet  and  of  what  it  will  mean  to  many 
toilers.  One  cannot  relinquish  this  exploration  of  the  deeper 
meanings  of  the  book  without  voicing  the  reflection  that  if  it  is 
true  that  the  man  who  causes  two  blades  of  grass  to  grow  where 
one  grew  before  is  a  benefactor  of  the  race,  then  the  man  who 
effects  a  combination  by  which  one  watt  of  electrical  energy 
serves  the  purpose  of  two  is,  in  a  sense,  hardly  less  so. 

Much  information  of  historical  value,  some  of  it  never 
before  published,  is  scattered  through  the  chapters  of  this  book. 
Mr.  Insull  came  to  this  country  from  London,  his  native  city, 
in  1881,  when  he  was  twenty-one  years  old,  to  be  private  sec- 
retary to  Thomas  A.  Edison.  From  that  day  to  this  he  has  been 
connected  with  electrical  enterprises.  His  opportunities  for 
gaining  familiarity  with  all  the  various  forms  of  electrical  un- 
dertakings have  been  exceptional.  His  deep  admiration  for 
his  old  chief,  Edison,  has  never  abated,  and  some  evidence  of 
this  loyalty  is  shown  in  nearly  every  chapter  of  the  present 
volume.  The  future  historian  of  that  electrical  development 
which  was  the  marvel  of  the  last  quarter  of  the  nineteenth 


EDITOR'S  INTRODUCTION  xxi 

century  and  has  become  the  necessity  of  the  first  quarter  of  the 
twentieth  will  surely  find  much  that  is  illuminating  in  the  fol- 
lowing pages. 

Originality  and  boldness  are  found  in  these  addresses,  but 
perhaps  the  dominant  note  is  that  of  enthusiasm.  The  author 
is  always  sounding  the  charge,  never  the  retreat;  the  papers  are 
intensely  alive,  vibrant  with  the  joy  of  achievement.  "It  is  a 
very  great  pleasure  to  me  to  look  back  over  the  last  thirty 
years,"  says  the  speaker  in  "Thirty  Years  of  Electrical  De- 
velopment." This  sturdy  note  of  optimism  is,  or  at  least  has 
been,  characteristic  of  the  industry  as  a  whole.  And  the 
speeches  are  not  without  vivacity,  frankness,  the  vivid  touch. 
There  is  dramatic  interest,  surely,  in  the  colloquy  with  the 
public-service  commissioner  in  the  Briarcliff  speech  on  "The 
Larger  Aspects  of  Making  and  Selling  Electrical  Energy." 
Nor  is  the  element  of  humor  neglected,  as  may  be  seen  by  the 
story  in  the  Brooklyn  address  of  the  sleepy  young  chap  of  the 
early  eighties  watching  the  galvanometer  at  night  during 
cable-testing  on  the  street  and  being  wakened  by  the  night- 
stick of  a  friendly  policeman  when  the  "boss"  came  around. 
In  the  same  chapter  —  that  on  "  Stepping  Stones  of  Central- 
Station  Development  through  Three  Decades" — there  is  an 
anecdote  of  Edison's  rough-and-ready  method  of  testing  his 
three-wire-distribution  idea  that  is  of  real  human  interest. 
Other  stories  and  touches  of  byplay  add  variety  to  the  pages, 
while  in  some  passages  intensity  and  earnestness  may  fairly  be 
said  to  attain  the  dignity  of  eloquence. 

Young  men  engaged  in  central-station  work  will  find  many 
words  of  encouragement  in  these  addresses.  The  advice  given 
is  not  altogether  of  the  hackneyed  sort.  It  gives  the  impression 
of  sincerity  and  good  feeling.  Thus,  addressing  the  employees 
of  his  own  company  ("A  Quarter-Century  Central-Station 
Anniversary  Celebration  in  Chicago"),  the  speaker  said: 
"There  is  one  thing,  in  my  twenty  years  of  managing  this  busi- 
ness, that  I  am  more  proud  of  than  anything  else,  and  that  is 
that  I  have  been  able  to  develop  it  with  the  assistance  of  the 
brains  within  the  business."  The  genuine,  sympathetic  touch 


xxii  EDITOR'S  INTRODUCTION 

here  is  unmistakable.  And  the  message  of  hope  is  not  given 
merely  to  build  up  one  organization,  for,  farther  on,  we  are 
told  that  "There  isn't  any  reason  why  this  Mississippi  Valley, 
the  richest  part  of  the  United  States  in  productive  ability, 
should  not  obtain  the  greater  part  of  its  men  for  the  management 
of  the  great  energy-producing  companies  that  must  be  estab- 
lished throughout  the  Valley  in  the  next  fifty  years  from  the 
boys  who  are  now  entering  the  service  of  the  Commonwealth 
Edison  Company." 

One  thing  to  be  borne  in  mind  in  considering  these  speeches 
is  that  they  were  nearly  all  extemporaneous.  They  are  not,  as 
a  rule,  the  carefully  worded  productions  of  secluded  care,  but 
the  talks  of  a  busy  man  of  affairs,  founded,  of  course,  on  study 
and  experience,  but  depending  for  the  immediate  spoken  word 
on  the  mental  resources  of  a  man  on  his  feet  and  facing  an 
audience.  In  many  cases  the  speaker  based  his  remarks  on 
diagrams,  curves  or  tables,  prepared  under  his  direction  by 
assistants  and  exhibited  to  the  assemblage.  Responding  to 
numerous  requests  for  addresses  from  different  organizations 
and  from  different  cities,  Mr.  Insull  spoke  on  the  same  general 
subjects  on  a  number  of  occasions.  To  avoid  duplication  the 
editor  has  condensed  some  of  the  addresses  where  the  repetition 
was  obvious.  But  where,  as  was  the  case  in  a  few  instances, 
new  matter  was  interwoven  with  what  had  been  given,  in  sub- 
stance, before,  the  plan  has  been  to  retain  the  whole  rather  than 
to  reject  it  or  to  attempt  to  "unscramble"  the  new  from  the  old. 
Nevertheless,  the  amount  of  duplication  in  the  present  volume 
is  not  great. 

Perhaps  a  few  words  about  the  terminology  of  the  electrical 
art  may  be  permitted.  During  the  period  covered  by  these  ad- 
dresses there  has  been  improvement  in  the  manner  of  speaking 
and  writing  about  electrical  things.  Thus,  "electric  current" 
has  been  restored  to  its  proper  scientific  meaning,  being  now 
rarely  used  to  designate  "electrical  energy,"  of  which  it  is  only 
one  component.  With  more  careful  study  we  have  come  to  use 
the  words  "force,"  "power"  and  "energy"  with  greater  pre- 
cision in  electrical  work.  We  differentiate  more  clearly  at  the 


EDITOR'S  INTRODUCTION  xxiii 

present  time  between  "transmit"  and  "distribute."  We  are 
more  apt  to  speak  of  "generator"  than  "dynamo"  (although 
there  seems  to  be  little  reason  for  this  change,  for  "dynamo- 
electric  machine"  has  a  respectable  lineage),  and  of  "generating 
station"  rather  than  "power  house."  The  words  "trans- 
former" and  "converter,"  once  synonymous,  designate  radically 
different  types  of  apparatus  today,  and  "storage  battery"  has 
prevailed  over  "accumulator,"  once  the  more  usual  appellation. 
"Power  factor"  and  "load  factor"  have  been  more  clearly 
defined,  and  "diversity  factor"  has  come  into  being  with  the 
development  of  the  art.  But  there  is  still  some  confusion  in 
the  nomenclature,  as,  to  take  a  familiar  example,  in  the  use  of 
the  qualifying  words  "electric"  and  "electrical."  Apparently, 
the  tendency  is  to  assign  to  the  former  the  status  of  a  specific 
qualitative,  as  in  "electric  motor"  and  "electric  railway," 
and  to  the  latter  that  of  a  general  qualitative,  as  in  "electrical 
engineering"  and  "electrical  phenomena."  However,  this 
distinction  is  not  always  observed.  Those  who  are  curious  in 
such  matters  may  notice,  possibly,  some  discrepancy  in  the  use 
of  electrical  terms  in  the  earlier  and  later  addresses  presented  in 
this  work.  The  editor  has  felt  free  to  alter  phraseology  in  the 
interest  of  clearness,  but  not  when  such  re-phrasing  would 
replace  the  idiom  of  other  days  in  such  a  manner  as  to  obliterate 
racy  characteristics  of  value. 

Forty  speeches  and  papers  are  given  in  this  volume,  follow- 
ing some  preliminary  matter  relating  to  the  early  days  of  cen- 
tral-station history.  The  date  of  the  first  one  is  September  14, 
1897,  and  of  the  last  April  20,  1914.  Over  half  were  delivered 
in  Chicago,  nine  in  or  very  near  New  York,  and  the  remainder 
in  other  places  in  the  United  States.  The  list  does  not  include 
all  of  Mr.  Insult's  addresses,  and  several  have  been  delivered 
since  the  last  of  those  printed  here.  It  will  be  noticed  that 
after  one  address  in  1897  and  two  in  1898  there  was  none  for 
nearly  ten  years.  It  was  in  this  period,  it  may  be  conceived, 
that  the  larger  aspects  of  the  business  of  supplying  electrical 
energy  were  shaping  themselves  in  the  mind  of  the  originator  of 
these  contributions  to  the  development  of  the  industry.  It 


xxiv  EDITOR'S  INTRODUCTION 

was  a  learning  period  —  a  period  of  awakening.  The  papers 
show  growth,  expansion,  broadening;  and  yet  the  very  earliest 
is  strikingly  modern  when  re-read  today.  But,  after  all,  this 
first  essay  goes  back  only  eighteen  years,  while  the  central- 
station  industry  is  thirty-three  years  old.  The  development 
of  the  industry,  therefore,  would  seem  to  be  logical  and  to 
rest  on  foundations  broad  and  secure. 

The  editor  desires  to  express  his  cordial  thanks,  for  en- 
couragement and  assistance,  to  his  friends,  Mr.  W.  D.  Weaver, 
of  Charlottesville,  Virginia,  and  Messrs.  Edward  Caldwell  and 
T.  Commerford  Martin,  of  New  York.  Finally,  he  wishes 
to  avow  responsibility  for  all  statements,  whether  of  fact  or 
comment,  appearing  in  the  notes  inserted  in  the  text. 

WILLIAM  EUGENE  KEILY. 

Chicago,  March,  1915. 


EARLY  WORK  WITH  EDISON 

As  has  been  noted  on  preceding  pages,  Mr.  Insull  obtained 
his  start  in  the  electrical  industry  as  secretarial  assistant  and 
man  of  affairs  for  Thomas  A.  Edison.  He  conceived  a  warm 
friendship  and  a  deep  admiration  for  the  famous  inventor. 
Some  expression  to  these  sentiments  is  given,  often  in  Mr. 
Insull's  own  language,  in  the  biography  "Edison  —  His  Life 
and  Inventions,"  written  by  Messrs.  Frank  Lewis  Dyer  and 
Thomas  Commerford  Martin,  and  published  and  copyrighted 
in  1910  by  Harper  &  Brothers.  By  permission,  the  extracts 
which  make  up  this  chapter  are  reprinted  from  this  work,  to 
which  the  citations  refer. 

WHEN  THE  TELEPHONE  WAS  A  CURIOSITY 

Mr.  Samuel  Insull,  who  afterward  became  private  secre- 
tary to  Mr.  Edison,  and  a  leader  in  the  development  of  Ameri- 
can electrical  manufacturing  and  the  central-station  art,  was 
also  in  close  touch  with  the  London  situation  thus  depicted,1 
being  at  the  time  private  secretary  to  Colonel  Gouraud,  and 
acting  for  the  first  half -hour  as  the  amateur  telephone  operator 
in  the  first  experimental  exchange  erected  in  Europe.  He  took 
notes  of  an  early  meeting  where  the  affairs  of  the  company  were 
discussed  by  leading  men  like  Sir  John  Lubbock  (Lord  Avebury) 
and  the  Right  Hon.  E.  P.  Bouverie  (then  a  cabinet  minister), 
none  of  whom  could  see  in  the  telephone  much  more  than  an 
auxiliary  for  getting  out  promptly  in  the  next  morning's  papers 
the  midnight  debates  in  Parliament.  "I  remember  another 
incident,"  says  Mr.  Insull.  "It  was  at  some  celebration  of  one 

1.  Vol.  I,  chap,  ix,  page  192.  The  "London  situation"  grew  out  of  the 
introduction  of  Edison's  telephone  in  England  in  or  about  the  year  1879. 


xxvi  EARLY  WORK  WITH  EDISON 

of  the  royal  societies  at  the  Burlington  House,  Piccadilly. 
We  had  a  telephone  line  running  across  the  roofs  to  the  base- 
ment of  the  building.  I  think  it  was  to  Tyndall's  laboratory  in 
Burlington  Street.  As  the  ladies  and  gentlemen  came  through, 
they  naturally  wanted  to  look  at  the  great  curiosity,  the  loud- 
speaking  telephone;  in  fact,  any  telephone  was  a  curiosity  then. 
Mr.  and  Mrs.  Gladstone  came  through.  I  was  handling  the 
telephone  at  the  Burlington  House  end.  Mrs.  Gladstone  asked 
the  man  over  the  telephone  whether  he  knew  if  a  man  or  woman 
was  speaking;  and  the  reply  came  in  quite  loud  tones  that  it 
was  a  man!" 

LOOKING  AFTER  THE  PAY-ROLLS 

In  addition1  there  must  be  included  Mr.  Samuel  Insull, 
whose  activities  for  many  years  as  private  secretary  and 
financial  manager  were  devoted  solely  to  Mr.  Edison's  inter- 
ests, with  Menlo  Park  as  a  center  and  main  source  of  anxiety 
as  to  pay-rolls  and  other  constantly  recurring  obligations. 

YOUNG  INSULL  PASSES  UNDER  THE  SPELL  OF  EDISON  AT  THEIR 
FIRST  INTERVIEW 

These  preparations2  overlap  the  reinforcement  of  the  staff 
with  some  notable  additions,  chief  among  them  being  Mr. 
Samuel  Insull,  whose  interesting  narrative  of  events  fits  ad- 
mirably into  the  story  at  this  stage,  and  gives  a  vivid  idea 
of  the  intense  activity  and  excitement  with  which  the  whole 
atmosphere  around  Edison  was  then  surcharged:  "I  first  met 
Edison  on  March  1,  1881. 3  I  arrived  in  New  York  on  the 
City  of  Chester  about  five  or  six  in  the  evening  and  went  direct 

1.  Vol.  I,  chap,  xii,  page    274.    This  refers  to  the  latter  half  of  the 
Menlo  Park  period  of  1876-1886. 

2.  Vol.  I,  chap,  xiv,  page  328.     The  preparations  were   for  the  Paris 
Exposition  of  1881. 

3.  A  recent  examination  of  a  letter  written  by  Mr.  Insull  to  his  mother  at 
the  time  shows  that  this  date  should  be  February  28,  1881,  one  day  earlier  than 
the  date  of  the  text.     It  follows  that  the  "March  2d"  of  page  xxviii  of  this 
book  should  be  "  March  1st." 


EARLY  WORK  WITH  EDISON  xxvii 

to  65  Fifth  Avenue.  I  had  come  over  to  act  as  Edison's  private 
secretary,  the  position  having  been  obtained  for  me  through 
the  good  offices  of  Mr.  E.  H.  Johnson,  whom  I  had  known  in 
London,  and  who  wrote  to  Mr.  U.  H.  Painter,  of  Washington, 
about  me  in  the  fall  of  1880.  Mr.  Painter  sent  the  letter  on 
to  Mr.  Batchelor,  who  turned  it  over  to  Edison.  Johnson 
returned  to  America  late  in  the  fall  of  1880,  and  in  January, 
1881,  cabled  to  me  to  come  to  this  country.  At  the  time  he 
cabled  for  me  Edison  was  still  at  Menlo  Park,  but  when  I 
arrived  in  New  York  the  famous  offices  of  the  Edison  Electric 
Light  Company  had  been  opened  at  65  Fifth  Avenue,  and 
Edison  had  moved  into  New  York  with  the  idea  of  assisting  in 
the  exploitation  of  the  company's  business. 

"I  was  taken  by  Johnson  direct  from  the  Inman  steamship 
pier  to  65  Fifth  Avenue,  and  met  Edison  for  the  first  time. 
There  were  three  rooms  on  the  ground  floor  at  that  time.  The 
front  one  was  used  as  a  kind  of  reception-room;  the  room  im- 
mediately behind  it  was  used  as  the  office  of  the  president  of 
the  Edison  Electric  Light  Company,  Major  S.  B.  Eaton.  The 
rear  room,  which  was  directly  back  of  the  front  entrance  hall, 
was  Edison's  office,  and  there  I  first  saw  him.  There  was  very 
little  in  the  room  except  a  couple  of  walnut  roller-top  desks, 
which  were  very  generally  used  in  American  offices  at  that  time. 
Edison  received  me  with  great  cordiality.  I  think  he  was 
possibly  disappointed  at  my  being  so  young  a  man;  I  had  only 
just  turned  twenty-one,  and  had  a  very  boyish  appearance. 
The  picture  of  Edison  is  as  vivid  to  me  now  as  if  the  incident 
occurred  yesterday,  although  it  is  now  [1910]  more  than  twenty- 
nine  years  since  that  first  meeting.  I  had  been  connected 
with  Edison's  affairs  in  England  as  private  secretary  to  his 
London  agent  for  about  two  years,  and  had  been  taught  by 
Johnson  to  look  on  Edison  as  the  greatest  electrical  inventor  of 
the  day — a  view  of  him,  by  the  way,  which  has  been  greatly 
strengthened  as  the  years  have  rolled  by.  Owing  to  this,  and 
to  the  fact  that  I  felt  highly  flattered  at  the  appointment  as 
his  private  secretary,  I  was  naturally  prepared  to  accept  him 
as  a  hero. 


xxviii  EARLY  WORK  WITH  EDISON 

"With  my  strict  English  ideas  as  to  the  class  of  clothes  to 
be  worn  by  a  prominent  man,  there  was  nothing  in  Edison's 
dress  to  impress  me.  He  wore  a  rather  seedy  black  diagonal 
Prince  Albert  coat  and  waistcoat,  with  trousers  of  a  dark 
material,  and  a  white  silk  handkerchief  around  his  neck,  tied 
in  a  careless  knot  falling  over  the  stiff  bosom  of  a  white  shirt 
somewhat  the  worse  for  wear.  He  had  a  large  'wideawake'  hat 
of  the  sombrero  pattern  then  generally  used  in  this  country, 
and  a  rough,  brown  overcoat,  cut  somewhat  similarly  to  his 
Prince  Albert  coat.  His  hair  was  worn  quite  long,  and  hanging 
carelessly  over  his  fine  forehead.  His  face  was  at  that  time, 
as  it  is  now,  clean  shaven.  He  was  full  in  face  and  figure,  al- 
though by  no  means  as  stout  as  he  has  grown  in  recent  years. 
What  struck  me  above  everything  else  was  the  wonderful 
intelligence  and  magnetism  of  his  expression,  and  the  extreme 
brightness  of  his  eyes.  He  was  far  more  modest  than  in  my 
youthful  picture  of  him.  I  had  expected  to  find  a  man  of 
distinction.  His  appearance,  as  a  whole,  was  not  what  you 
would  call  'slovenly';  it  is  best  expressed  by  the  word  'care- 
less.' " 

Mr.  Insull  supplements  this  pen-picture  by  another,  bearing 
upon  the  hustle  and  bustle  of  the  moment:  "After  a  short 
conversation  Johnson  hurried  me  off  to  meet  his  family,  and 
later  in  the  evening,  about  eight  o'clock,  he  and  I  returned  to 
Edison's  office;  and  I  found  myself  launched  without  further 
ceremony  into  Edison's  business  affairs.  Johnson  had  already 
explained  to  me  that  he  was  sailing  the  next  morning,  March  2d, 
on  the  S.S.  Arizona  and  that  Mr.  Edison  wanted  to  spend  the 
evening  discussing  matters  in  connection  with  his  European 
affairs.  It  was  assumed,  inasmuch  as  I  had  just  arrived  from 
London,  that  I  would  be  able  to  give  more  or  less  information 
on  this  subject.  As  Johnson  was  to  sail  the  next  morning  at 
five  o'clock,  Edison  explained  that  it  would  be  necessary  for 
him  to  have  an  understanding  of  European  matters.  Edison 
started  out  by  drawing  from  his  desk  a  check-book  and  stating 
how  much  money  he  had  in  the  bank;  and  he  wanted  to  know 
what  European  telephone  securities  were  most  salable,  as  he 


EARLY  WORK  WITH  EDISON  xxix 

wished  to  raise  the  necessary  funds  to  put  on  their  feet  the 
incandescent-lamp  factory,  the  electric-tube  works,  and  the 
necessary  shops  to  build  dynamos.  All  through  the  interview 
I  was  tremendously  impressed  with  Edison's  wonderful  re- 
sourcefulness and  grasp,  and  his  immediate  appreciation  of 
any  suggestion  of  consequence  bearing  on  the  subject  under 
discussion. 

"He  spoke  with  very  great  enthusiasm  of  the  work  before 
him  —  namely,  the  development  of  his  electric-lighting  system; 
and  his  one  idea  seemed  to  be  to  raise  all  the  money  he  could 
with  the  object  of  pouring  it  into  the  manufacturing  side  of  the 
lighting  business.  I  remember  how  extraordinarily  I  was  im- 
pressed with  him  on  this  account,  as  I  had  just  come  from  a 
circle  of  people  in  London  who  not  only  questioned  the  possi- 
bility of  the  success  of  Edison's  invention,  but  often  expressed 
doubt  as  to  whether  the  work  he  had  done  could  be  called  an 
invention  at  all.  After  discussing  affairs  with  Johnson — who 
was  receiving  his  final  instructions  from  Edison — far  into  the 
night,  and  going  down  to  the  steamer  to  see  Johnson  aboard,  I 
finished  my  first  night's  business  with  Edison  somewhere  be- 
tween four  and  five  in  the  morning,  feeling*  thoroughly  imbued 
with  the  idea  that  I  had  met  one  of  the  great  master  minds  of 
the  world.  You  must  allow  for  my  youthful  enthusiasm,  but 
you  must  also  bear  in  mind  Edison's  peculiar  gift  of  magnetism, 
which  has  enabled  him  during  his  career  to  attach  so  many  men 
to  him.  I  fell  a  victim  to  the  spell  at  the  first  interview." 

WHAT  WAS  EXPECTED  OF  EDISON'S  PRIVATE  SECRETARY 

We  are  indebted1  to  Mr.  Insull  for  a  graphic  sketch  of  Edison 
at  this  period,  and  of  the  conditions  under  which  work  was 
done  and  progress  was  made:  "I  do  not  think  I  had  any  under- 
standing with  Edison  when  I  first  went  with  him  as  to  my 
duties.  I  did  whatever  he  told  me,  and  looked  after  all  kinds 
of  affairs,  from  buying  his  clothes  to  financing  his  business. 

1.  Vol.  I,  chap,  xv,  page  368.  The  period  is  that  of  1881  and  imme- 
diately succeeding  years. 


xxx  EARLY  WORK  WITH  EDISON 

I  used  to  open  the  correspondence  and  answer  it  all,  sometimes 
signing  Edison's  name  with  my  initial,  and  sometimes  signing 
my  own  name.  If  the  latter  course  was  pursued,  and  I  was 
addressing  a  stranger,  I  would  sign  as  Edison's  private  secre- 
tary. I  held  his  power  of  attorney,  and  signed  his  checks.  It 
was  seldom  that  Edison  signed  a  letter  or  check  at  this  time. 
If  he  wanted  personally  to  send  a  communication  to  anybody, 
if  it  was  one  of  his  close  associates,  it  would  probably  be  a  pencil 
memorandum,  signed  'Edison.'  I  was  a  shorthand  writer,  but 
seldom  took  down  from  Edison's  dictation,  unless  it  was  on 
some  technical  subject  that  I  did  not  understand.  I  would  go 
over  the  correspondence  with  Edison,  sometimes  making  a 
marginal  note  in  shorthand,  and  sometimes  Edison  would 
make  his  own  notes  on  letters,  and  I  would  be  expected  to 
clean  up  the  correspondence  with  Edison's  laconic  comments 
as  a  guide  as  to  the  character  of  answer  to  make.  It  was  a 
very  common  thing  for  Edison  to  write  the  words  'Yes'  or  'No,' 
and  this  would  be  all  I  had  on  which  to  base  my  answer. 
Edison  marginalized  documents  extensively.  He  had  a  won- 
derful ability  in  pointing  out  the  weak  points  of  an  agreement 
or  a  balance-sheet,  all  the  while  protesting  he  was  no  lawyer 
or  accountant;  and  his  views  were  expressed  in  very  few  words, 
but  in  a  characteristic  and  emphatic  manner. 

ENGINEERING  AND  MANUFACTURING  WORK 

"The  first  few  months  I  was  with  Edison  he  spent  most  of 
the  time  in  the  office  at  65  Fifth  Avenue.  Then  there  was  a 
great  deal  of  trouble  with  the  life  of  the  lamps  there,  and  he 
disappeared  from  the  office  and  spent  his  time  largely  at  Menlo 
Park.  At  another  time  there  was  a  great  deal  of  trouble  with 
some  of  the  details  of  construction  of  the  dynamos,  and  Edison 
spent  a  lot  of  time  at  Goerck  Street,  which  had  been  rapidly 
equipped  with  the  idea  of  turning  out  bipolar  dynamo-electric 
machines,  direct-connected  to  the  engine,  the  first  of  which 
went  to  Paris  and  London,  while  the  next  were  installed  in  the 
old  Pearl  Street  station  of  the  Edison  Electric  Illuminating 


EARLY  WORK  WITH  EDISON  xxxi 

Company  of  New  York,  just  south  of  Fulton  Street,  on  the 
west  side  of  the  street.  Edison  devoted  a  great  deal  of  his 
time  to  the  engineering  work  in  connection  with  the  laying 
out  of  the  first  incandescent  electric-lighting  system  hi  New 
York.  Apparently  at  that  time  —  between  the  end  of  1881 
and  spring  of  1882  —  the  most  serious  work  was  the  manu- 
facture and  installation  of  underground  conductors  in  this 
territory.  These  conductors  were  manufactured  by  the 
Electric  Tube  Company,  which  Edison  controlled  in  a  shop  at 
65  Washington  Street,  run  by  John  Kruesi.  Half-round  cop- 
per conductors  were  used,  kept  in  place  relatively  to  each 
other  and  in  the  tube,  first  of  all  by  a  heavy  piece  of  cardboard 
and  later  on  by  a  rope;  and  then  put  in  a  twenty-foot  iron  pipe; 
and  a  combination  of  asphaltum  and  linseed  oil  was  forced  into 
the  pipe  for  the  insulation.  I  remember  as  a  coincidence  that 
the  building  was  only  twenty  feet  wide.  These  lengths  of 
conductors  were  twenty  feet  six  inches  long,  as  the  half-round 
coppers  extended  three  inches  beyond  the  drag-ends  of  the 
lengths  of  pipe;  and  in  one  of  the  operations  we  used  to  take 
the  length  of  tubing  out  of  the  window  in  order  to  turn  it  around. 
I  was  elected  secretary  of  the  Electric  Tube  Company,  and  was 
expected  to  look  after  its  finance;  and  it  was  in  this  position 
that  my  long  intimacy  with  John  Kruesi  started." 


THE  SALE  OF  THE  SCHENECTADY  WORKS 

"At  these  new  works1  our  orders  were  far  in  excess  of  our 
capital  to  handle  the  business,  and  both  Mr.  Insull  and  I  were 
afraid  we  might  get  in  trouble  for  lack  of  money.  Mr.  Insull 
was  then  my  business  manager,  running  the  whole  thing;  and, 
therefore,  when  Mr.  Henry  Villard  and  his  syndicate  offered 
to  buy  us  out,  we  concluded  it  was  better  to  be  sure  than  be 
sorry;  so  we  sold  out  for  a  large  sum." 

1.  Vol.  I,  chap,  xv,  page  382.  The  quotation  in  this  paragraph  is 
from  Edison.  The  "new  works"  are  those  at  Schenectady,  N.  Y.  The 
formation  of  the  Edison  General  Electric  Company  followed  the  sale  men- 
tioned. 


AN  INTIMATE  PERSONAL  OPINION  OF  THE 

PROSPECTS  OF  THE  ELECTRIC  LIGHT 

IN  1881  FROM  EDISON'S  YOUTHFUL 

PRIVATE  SECRETARY 

Two  months  after  landing  on  the  soil  of  the  United  States 
for  the  first  time,  and  becoming  private  secretary  to  Mr.  Edison, 
Mr.  Insull  wrote  a  letter  to  a  friend  in  England  which  is  worth 
preservation  for  its  historical  value  as  well  as  a  real  "human- 
interest"  document.  This  letter  to  Mr.  J.  E.  Kingsbury,1 
which  forms  the  subject  of  this  chapter,  gives  a  vivid,  first-hand 
description  of  the  high  hopes,  the  high-pressure  planning,  the 
days  and  nights  of  hard  but  enthusiastic  work  under  the  direc- 
tion of  the  master  mind  of  the  great  inventor  at  the  time  when 
incandescent  electric  lighting  and  central-station  electric  serv- 
ice were  really  in  their  infancy.  A  youth  of  twenty-one 
was  the  writer  of  the  letter,  and  the  enthusiasm  of  the  boyish 
hero- worshiper  is  very  evident;  and  yet,  at  the  first  flush  of 
manhood,  to  be  a  trusted  assistant  among  those  who  were 
bringing  into  being  a  great  but  dimly  foreseen  industry  was 
enough  to  stir  the  pulses  of  a  man  more  sluggish  than  Mr. 
Kingsbury's  correspondent. 

1.  Mr.  Kingsbury  and  Mr.  Insull,  both  Englishmen  by  birth,  were  asso- 
ciated with  Colonel  George  E.  Gouraud,  at  that  time  Edison's  agent  in  London, 
from  early  in  1879  until  early  in  1881,  when  Mr.  Insull  came  to  the  United 
States.  As  mentioned  in  the  preceding  chapter,  the  youthful  Insull  was 
Colonel  Gouraud's  private  secretary.  His  friend  Kingsbury  handled  the 
publicity  and  advertising  affairs  of  the  office,  being  also  associated  with  an 
uncle  who  was  in  the  advertising-agency  business.  Later  Mr.  Kingsbury 
formed  a  connection  with  the  English  house  of  the  Western  Electric  Company, 
and  for  many  years  he  was  at  the  head  of  the  London  office,  being  still  (1915)  a 
director  of  the  Western  Electric  Company,  Limited.  It  is  rather  interesting  to 
note  that  one  of  the  pair  became  the  London  representative  of  Chicago's  great- 
est electrical  manufacturing  concern  and  the  other  the  head  of  the  great  electric- 
service  company  of  Chicago. 

XXXV 


xxxvi  PROSPECTS   IN   1881 

The  letter  was  written  in  long-hand  on  twelve  sheets  of 
paper.  Two  pages,  the  first  and  the  last,  are  reproduced  in 
reduced  facsimile.  Practically  complete,  the  missive  reads  as 
follows : 

LABORATORY  OF 

THOMAS  A.  EDISON 

MENLO   PARK,  N.  J. 

Sunday,  1st  May,  1881. 
My  Dear  Kingsbury: 

I  was  immensely  glad  to  get  your  letter  of  some  day  I  know 
not,  as  I  am  writing  this  at  Menlo  Park,  and  the  letter  from 
you  is  in  my  desk  at  65  5th  Ave.,  N.  Y. 

Mr.  Edison  and  myself  came  out  here  last  night  to  spend 
the  Sunday.  We  mistook  the  time  the  train  started  and  as 
a  consequence  we  only  got  within  six  miles  of  this  [place]  and 
came  on  in  a  conveyance  the  exact  character  and  title  of  which 
I  cannot  tell  you,  as  it  was  so  dark  that  I  could  not  see  the 
concern  with  that  clearness  necessary  to  an  exact  description. 
My  description  of  the  country  must  for  the  same;  reason  go  by 
default. 

I  am  stopping  at  Edison's  house  today  and  shall  go  back 
to  N.  Y.  in  the  morning.  Edison's  people  are  A  No.  1  and 
make  it  very  pleasant  for  me.  This  morning  Mrs.  Edison 
placed  a  fine  pair  of  grey  ponies  at  my  disposal,  and  I  flew 
along  the  rough  Jersey  road  with  a  comfort  only  to  be  attained 
with  the  assistance  of  American  ponies  attached  to  the  light 
vehicles  which  abound  here. 

Your  letter  was  most  acceptable.  I  was  wondering  whether 
you  had  forgotten  me  altogether,  and  I  am  glad  to  see  that  you 
have  not.  Your  assumption  that  I  get  all  the  news  is  quite 
misplaced,  and  your  letter  gave  me  information  for  which  I  was 
thirsting.  Just  go  into  a  little  more  detail  the  next  time  you 
write  me. 

A  few  days  after  I  came  here  I  called  on  the  people  con- 
trolling the  electric  pen  here  (The  Western  Electric  Mfg.  Co.) 


[ 

I 

t£:=i 
j^- 

f 

k 


1 
^ 

^ 

H 


N     f 

i  ji? 
si  < « 


\ 


i  W 


it 


0       \^ 

;'M 

-v    V    VI 


;i 


v^ 

0 
a 

4 

* 
J 


^ 


^.H-ir, 

r,    j 


Vv^ 

1 


MJUNftJ<N;J 

yiiip 

*  "«   «  ^  v  ^   >i.   j  .<k\ 


•^ 
A- 

a* 


\ 

i 


^ 


-\ 

k^ 


Ji^l 

V  N  t*  x-  si 

j  v^-v  ^  ^ 


s)'V  >>^   i    J 

lUr 


rV 

i 


I 


.£ 
(? 

"i 

e 

.    t2 


PROSPECTS   IN   1881  xxxvii 

and  found  out  the  state  of  affairs  in  Australia.  They  are 
friends  of  friends  of  mine,  and  as  I  have  met  most  of  their 
principal  people  in  London  I  was  on  good  terms  with  them 
right  away.  They  told  me  they  had  written  your  brother 
offering  him  the  sole  agency  and  after  my  explanations  said 
they  would  work  with  him  the  more  cordially. 

You  ask  me  about  Electric  Light.  Well  I  have  seen  700 
lights  burning,  the  current  generated  from  the  same  dynamo- 
electric  machine  for  the  whole  lot,  all  of  them  getting  their 
current  from  the  same  mains  (i.e.,  street  cables)  of  no  less  than 
eight  miles  in  length.  Edison  gets  eight  lights  or  thereabouts 
of  16  candles  each  per  indicated  horsepower,  which  allows  of  his 
competing  with  gas.  Into  the  details  of  the  cost  I  Cannot  go, 
as  it  is  not  told  to  anybody.  Suffice  it  to  say  that  here  in 
New  York  he  can  produce  light  and  get  a  handsome  profit  on 
it  at  a  charge  to  the  consumer  which  would  ruin  the  gas  com- 
panies. There  is  not,  however,  that  vast  difference  between 
the  cost  of  the  two  lights  which  will  allow  him  to  be  utterly 
oblivious  of  his  friends,  the  gas  producers;  but  his  estimates 
show  that  he  can  compete  with  them  and  do  it  at  a  handsome 
profit.  Besides  he  can  furnish  power  by  means  of  electric 
motors,  which  will  give  him  an  enormous  pull  over  the  gas  com- 
panies as  he  will  not  have  the  greater  part  of  his  plant  lying 
idle  during  365  working  days  of  the  year,  as  the  gas  companies 
with  but  very  slight  exception  must,  as  the  business  is  at  night; 
but  he  can  sell  electricity  for  power  purposes  by  day,  which 
means  that  his  plant  is  never  idle,  his  capital  is  never  running 
to  waste,  but  is  always  earning  money  by  night  and  by  day  alike. 
Edison  will  work  just  as  the  gas  companies  do.  He  will  have 
central  stations  where  the  current  will  be  generated  (probably 
one  station  of  about  15,000  lights  to  each  square  mile).  This 
current  will  be  conveyed  along  the  streets  underground  by 
means  of  copper  wire  embedded  in  two-inch  iron  pipes  insulated 
with  a  special  form  of  insulation  of  his  own  invention.  Branch 
pipes  will  be  led  into  each  house,  and  the  electricity,  whether 
for  light  or  power  (to  us  it  is  all  the  same),  will  be  sold  by  means 
of  a  registration  on  an  electric  meter,  which  is  the  most  ingenious 


xxxviii  PROSPECTS  IN   1881 

and  yet  the  simplest  thing  imaginable.  The  district  which  he 
will  light  up  first  in  New  York  has  about  15,650  lights  in  the 
various  buildings  in  the  district  and  a  great  deal  of  power 
varying  in  amounts.  He  is  getting  contracts  just  as  fast  as 
his  canvassers  apply  for  them,  and  we  have  large  gangs  of  men 
wiring  the  houses  in  anticipation  of  the  time  when  we  can  lay 
our  mains,  erect  our  dynamo  machinery  and  light  up.  I 
suppose  this  district  will  be  all  lighted  up  in  from  three  to  four 
months,  and  then  you  [will]  see  what  you  will  see.  You  will 
witness  the  amazing  sight  of  those  English  scientists  eating  that 
unpalatable  crow  of  which  Johnson  used  to  speak  in  his  letters 
to  me  when  I  was  in  the  old  country. 

Menlo  Park  is  practically  abandoned.  All  experiments 
are  finished;  all  speculation  on  the  probable  results  are  dismissed; 
and  Edison  thinks,  and  so  does  everyone  else  who  has  looked 
into  the  matter,  that  success  is  assured.  Of  course  time  alone 
can  prove  this.  As  for  myself,  I  am  not  competent  to  judge 
but  I  can  use  my  eyes,  can  see  the  success  with  which  the  houses, 
fields,  roads  and  Depot  have  been  illuminated  here,  and  I  can 
see  nothing  to  disprove  the  assertions.  His  lamps  last  about 
400  hours;  at  all  events  that  is  the  estimate  by  a  time  test,  i.e., 
by  running  them  at  about  four  times  their  ordinary  candle 
power  until  the  carbons  break;  but  this  estimate  is  every  day 
falsified,  and  experience  points  to  the  conclusion  that  the  life 
of  his  lamps  will  be  much  longer  than  the  estimate.  As  for 
rivals,  Edison  has  but  little  fear,  in  fact,  none  from  them.  I  have 
seen  how  Maxim's  lamps  go,  and  his  utter  want  of  a  system  by 
means  of  which  alone  can  success  be  attained,  and  Swan  we  put 
in  about  the  same  category,  but  as  he  is  a  fellow  countryman  of 
mine,  I  will  spare  you  the  plain  language  used  towards  him. 

To  carry  out  the  gigantic  undertaking  of  fighting  the  gas 
companies  we  have  much  to  do.  A  great  difficulty  is  to  get 
our  machinery  manufactured.  This  Mr.  Edison  will  attend 
to  himself.  He  personally  has  taken  very  large  works  for  this 
purpose,  where  he  will  probably  within  the  next  six  months 
have  1,500  men  at  work.  The  various  parts  of  the  machines 
will  be  contracted  out,  one  firm  making  one  part  in  large  quan- 


PROSPECTS  IN   1881  xxxix 

titles,  another  firm  another  part  and  so  on.  At  Mr.  Edison's 
works  ("Edison  Machine  Works"),  all  these  parts  will  be  as- 
sembled and  put  together.  Then  there  is  the  lamp  factory, 
in  which  Mr.  Edison  owns  almost  all  the  interest,  for  manu- 
facturing lamps  and  which  is  now  turning  out  one  thousand 
lamps  a  day,  the  Electric  Tube  Company  (of  which  I  am 
secretary  and  Mr.  E.  president)  for  manufacturing  our  street 
mains.  So  you  can  imagine  what  Mr.  Edison  has  to  do,  as  he 
is  the  mainspring  and  ruling  spirit  of  everything.  And  you  can 
imagine  also  what  I  have  to  do  as  his  private  secretary.  We 
work  every  night  till  the  small  hours,  and  today  (Sunday)  is  the 
first  Sunday  I  have  not  been  at  the  office;  and  even  here  we  are 
at  work,  as  between  the  intervals  of  writing  this  letter  I  am 
taking  notes  of  a  lot  of  data  he  wants  before  I  go  to  bed  tonight. 
I  have  got  right  in  with  Edison,  sit  in  the  same  room  with  him, 
assist  him  in  everything,  and  am  his  private  secretary  in  every 
sense  of  the  word.  People  say  that  he  likes  me  very  much;  but 
time  must  be  left  to  prove  this.  Johnson  says  my  success  is 
assured,  and  last,  but  not  by  any  means  the  least,  I  am  abso- 
lutely satisfied  that  I  did  the  right  thing  in  coming  here. 

Please  find  out  for  me  and  let  me  know  at  the  earliest 
possible  moment  the  exact  price  per  1,000  ft.  at  which  gas  is 
sold  by  all  the  various  companies  in  London  and  also  the  price 
per  ton  at  which  the  various  kinds  of  steam  and  household  coal 
can  be  purchased  there  in  large  quantities.  Do  me  the  very 
great  favour  of  getting  this  out  to  me  at  once  as  I  have  promised 
to  get  it,  as  I  dispute  some  figures  furnished  here. 

[Two  short  paragraphs,  relating  principally  to  personal 
matters,  are  omitted  here.] 

With  kind  regards  to  your  cousin  and  uncle  and  hoping 
to  hear  from  you  soon  on  above  points,  believe  me 

Very  sincerely  yours, 

SAMUEL  INSULL. 
Address  me  as  follows 
65  Fifth  Avenue, 
New  York, 
U.  S.  A. 


ADDRESSES   OF   SAMUEL  INSULL 

PROBLEMS  OF  THE  EDISON  CENTRAL- 
STATION  COMPANIES  IN  1897 l 

THE  DECISION  of  the  members  of  the  association  at  the 
last  annual  meeting  to  hold  their  eighteenth  convention 
at  Niagara  Falls  was  naturally  dictated  by  the  world- 
wide interest  in  the  work  of  generating  and  distributing  elec- 
trical energy,  using  the  famous  Niagara  River  as  the  prime 
mover.  In  assembling  at  a  spot  where  so  much  can  be  learned 
by  those  engaged  in  the  electrical  business,  we  are,  as  an  asso- 
ciation, paying  the  highest  tribute  that  we  can  to  the  wonder- 
ful work  of  those  who  have  had  the  courage,  as  capitalists  and 
engineers,  to  design  and  build  a  plant  which  has  given  a  great 
impetus  to  the  economical  production  of  electricity,  not  only 
by  means  of  water  as  the  prime  mover,  but  by  all  other  methods 
for  the  production  of  electrical  energy.  We  cannot  all  have 

1.  It  was  in  1892  that  Mr.  Insull  resigned  the  position  of  second  vice- 
president  of  the  General  Electric  Company  (formed  by  the  consolidation  of 
the  Edison  General  Electric  Company  and  the  Thomson-Houston  Electric 
Company)  and  became  president  of  the  Chicago  Edison  Company.  Barely 
four  years  later  he  was  elected  president  of  the  Association  of  Edison  Illuminat- 
ing Companies,  the  membership  of  which,  then  as  now,  was  made  up  of  the 
electric-service  companies  of  the  larger  cities  of  this  country.  A  year  after- 
ward, on  September  14,  1897,  he  delivered  the  presidential  address  before  the 
Edison  association  which  is  reprinted  here.  The  convention  was  held  at  Niag- 
ara Falls,  N.  Y.,  as  shown  by  the  text.  This  is  perhaps  the  first  of  a  long  series 
of  addresses  before  societies  and  associations,  many  of  which  are  reproduced, 
in  whole  or  in  part,  in  this  work.  Mr.  Insull  was  thirty-seven  years  of  age 
at  the  time  of  its  delivery.  It  is  rather  remarkable  that  so  many  problems 
later  discerned  to  be  of  vital  importance  in  electric  service  should  be  here  ap- 
prehended so  clearly.  Concentration  of  production,  electrical  securities  as  in- 
vestments, the  use  of  larger  generating  units,  the  rate  question,  uniform  ac- 
counting, and  (with  prophetic  vision)  the  welcoming  of  new  inventions,  are 
some  of  the  subjects  presented  in  brief  for  discussion.  Unlike  nearly  all  of 
the  later  addresses,  this  one  was  written  out  in  advance  and  read  from  manu- 
script. 

1 


2  ADDRESSES  OF  SAMUEL  INSULL 

the  advantage  of  a  large  waterpower  to  assist  in  the  economical 
production  of  our  product  right  at  our  threshold;  but  in  studying 
the  methods  employed  here  at  Niagara  Falls  there  is  much  in- 
formation that  we  can  take  away  with  us  which  will  lead  us  to 
concentrate  our  works  at  the  most  economical  point  of  produc- 
tion in  the  various  cities  in  which  we  live.  Further,  we  can 
take  advantage  of  the  methods  of  distribution  here  employed 
to  distribute  our  product  to  distant  points,  where  we  desire 
to  use  it,  far  more  economically  than  we  can  produce  it  at  those 
distant  points  themselves. 

WHY  THE  EDISON  ASSOCIATION  WAS  FORMED 

Sometimes  the  question  is  asked  by  those  engaged  in  the 
electric  light  and  power  business  why  the  companies  known  as 
"Edison  illuminating  companies"  or  "Edison  licensees"  should 
find  it  necessary  to  combine  themselves  into  an  association. 
This  question  is  best  answered  by  the  fact  that  the  Edison 
illuminating  companies  all  operate  under  practically  the  same 
form  of  contract  with  the  company  that  controls  the  Edison 
patents,  namely,  the  Edison  Electric  Light  Company.  In  the 
main  they  purchase  their  goods,  under  contract,  from  the  same 
licensed  manufacturer  of  the  patent-owning  company,  namely, 
the  General  Electric  Company,  and  as  there  is  but  one  Edison 
operating  company  in  each  particular  city,  the  interests  of  these 
various  companies  are  naturally  mutual. 

When  I  remind  you  that  the  various  companies  which  we, 
either  as  officers  or  employees,  have  the  honor  of  representing 
here,  have  invested  in  their  business  more  than  ^lOSjOOO.OOO,1 
it  will  be  readily  appreciated  that  it  must  be  greatly  to  the 
advantage  of  the  various  properties  which  we  operate  that  we 
should  meet  from  time  to  time  to  exchange  ideas  as  to  the 
proper  conduct  of  our  business,  and  that  we  should  continue 

1.  Perhaps  this  amount  would  be  ten  times  as  great  if  stated  at  the  present 
day.  It  is  interesting  to  note  that  merely  the  electric-service  companies  of 
which  Mr.  Insull  is  the  president  at  the  present  time  (1915)  have  a  capitali- 
zation much  larger  than  the  figure  mentioned  in  the  text  for  all  the  com- 
panies in  the  Edison  association  eighteen  years  ago. 


CENTRAL  STATIONS  IN   1897  3 

an  organization  to  watch  over  our  interests  in  our  dealings 
with  the  patent-owning  and  manufacturing  side  of  the  Edison 
business. 

EXPERIENCE  OF  INVESTORS 

At  what  happily  would  appear  to  be  the  close  of  an  unparal- 
leled period  of  industrial  depression,  the  various  Edison  illumi- 
nating companies  have  certainly  much  cause  for  mutual  con- 
gratulation. Nothwithstanding  this  long  period  of  paralysis 
of  industrial  enterprise,  they  have,  with  hardly  an  exception, 
been  able  to  show  good  earning  capacity  and  to  pay  to  the  hold- 
ers of  their  securities  a  substantial  return  on  their  investment. 
This  is  partly  owing  to  the  inherent  merit  of  our  business, 
partly  to  the  wise  foresight  of  the  illustrious  inventor  whose 
system  this  business  is  based  on,  and  partly  to  the  conserva- 
tism of  the  original  projectors  of  the  Edison  lighting  and 
power  business,  who  insisted  that  the  Edison  illuminating 
companies  should  be  established  on  a  sound  financial  basis. 

This  experience  during  the  depressed  times  will  necessarily 
lead  investors  to  the  conclusion  that  the  securities  of  the  Edison 
illuminating  companies  are  among  the  most  desirable  of  local 
investments.  If  it  is  possible  to  earn  substantial  returns  on 
capital  invested  during  such  periods  of  business  disturbances 
as  that  which  we  have  recently  gone  through,  surely  we  can 
look  forward  to  laying  up  a  substantial  surplus  to  provide 
against  a  "rainy  day"  during  the  times  of  prosperity,  which  all 
of  us  hope,  and  some  of  us  think,  we  are  now  entering  upon. 

The  use  of  large  generating  units  in  the  larger  stations  for 
the  production  of  electrical  energy,  begun  but  a  few  years  ago, 
and  the  necessity  of  extending  the  field  of  our  operations  into 
distant  portions  of  our  territory,  have  forced  upon  many  of  us 
the  desirability  of  employing  more  economical  methods  of 
transmission,  with  a  view  to  the  abandonment  of  small  and 
expensive  stations  and  the  concentration  of  our  production  of 
electricity  at  the  point  of  greatest  economy.  This  matter 
was  touched  upon  to  a  certain  extent  at  the  last  convention.  A 
number  of  our  companies  are  now  spending  large  sums  of 


4  ADDRESSES  OF  SAMUEL  INSULL 

money  on  these  lines,  and  as  a  result  of  the  importance  that  this 
subject  has  assumed  it  is  but  natural  that  a  considerable  por- 
tion of  our  time  will  be  occupied  in  deliberating  on  this  subject. 
In  connection  with  the  matter  of  economical  transmission, 
the  subject  of  economical  storage  is  naturally  of  importance, 
and  we  should,  in  the  course  of  our  proceedings,  be  able  to 
obtain  considerable  information  on  the  advantages  of  the  use 
of  the  storage  battery,  in  connection  with  the  Edison  system, 
from  those  who  have  had  the  courage  of  their  opinions  and  have 
invested  largely  in  storage-battery  plants.  I  think  we  all 
concede  the  advantages  to  be  obtained  from  the  use  of  storage 
battery  from  the  storage  point  of  view  only;  but  some  of  us 
are  still  in  doubt  as  to  our  ability  to  save  sufficient  money  by 
this  plan  to  justify  the  large  investment  required. 

THE  RATE  QUESTION 

A  subject  of  prime  importance  in  connection  with  the 
economical  production  of  our  product  is  the  basis  upon  which 
we  shall  sell  it  to  our  customers.  It  should  be  remembered 
that  we  are  engaged  in  a  public  business,  and  that  our  companies 
have  duties  to  perform  to  the  public  as  well  as  money  to  earn 
for  our  security -holders.  In  fulfilling  our  obligations  to  the 
public  the  question  of  the  basis  of  charging  for  our  product  is 
the  all-important  one.  This  is  a  matter  which  on  previous 
occasions  has  received  your  earnest  attention,  and  is  one  on 
which  there  will  be  undoubtedly  earnest  discussion  on  this 
occasion. 

For  several  years  past  some  of  the  larger  illuminating 
companies,  members  of  this  association,  notably  those  of 
Boston,  New  York  and  Chicago,  have  been  in  the  habit  of 
comparing  the  details  of  cost  and  selling  price  of  their  product, 
their  accounts  being  kept  on  the  same  basis,  as  near  as  local 
conditions  will  permit.  The  information  obtained,  so  far  as 
my  experience  goes,  has  been  of  great  advantage  in  enabling 
the  companies  in  question  to  reduce  their  cost  and  in  assisting 
them  to  an  intelligent  decision  as  to  the  policy  to  adopt  towards 


CENTRAL  STATIONS  IN   1897  5 

their  customers.  It  seems  to  me  that  it  would  be  advantageous 
to  the  members  of  this  association  if  a  uniform  system  of  ac- 
counts were  adopted  and  arrangements  made  to  compare  the 
results  obtained  by  the  various  companies  operating  under  sim- 
ilar conditions.  In  putting  such  a  scheme  into  operation  a 
number  of  difficulties  would  naturally  have  to  be  overcome, 
such  as  the  differences  in  local  conditions  and  the  necessity  of 
carefully  guarding  information  of  so  confidential  a  character; 
but  I  would  suggest  the  desirability  of  the  association  instruct- 
ing the  executive  committee  to  take  this  matter  up  with  a  view 
to  formulating  a  plan  which  might  be  tried  experimentally. 

ESTABLISHMENT  OF  LAMP-TESTING  BUREAU 

The  main  business  of  your  executive  committee  during  the 
last  year  has  been  the  negotiating  with  the  General  Electric 
Company  of  a  contract  and  specifications  with  relation  to  the 
incandescent  lamps  used  by  the  Edison  licensees  who  are  mem- 
bers of  this  association.  As  a  result  a  lamp-testing  bureau 
has  been  established  at  the  lamp  factory  at  Harrison,  N.  J., 
which  bureau  is  under  the  control  of  this  association  and  is 
operated  for  its  account  by  Mr.  Wilson  S.  Howell.  A  number 
of  our  members  have  taken  advantage  of  the  arrangement 
made,  and  we  believe  that  considerable  benefit  will  accrue  to 
those  who  arrange  to  purchase  their  lamps  under  the  contract 
in  question.  Great  credit  is  due  to  the  chairman  and  mem- 
bers of  the  executive  committee  for  the  results  they  have  been 
able  to  achieve,  and  they  are  certainly  deserving  of  our  thanks 
for  the  time  and  money  they  have  spent  in  this  matter  for 
our  benefit.  I  think  for  the  first  time  in  the  history  of  the 
electric-lighting  business  we  are  now  able  to  obtain  lamps  made 
according  to  specifications  agreed  on,  and  the  results  must  be 
an  improvement  in  our  service  and  a  saving  of  money  to  our 
central-station  companies.  The  details  as  to  this  matter  will 
be  carefully  dealt  with  in  reports  by  Mr.  C.  L.  Edgar,  chairman 
of  the  executive  committee,  and  Mr.  Wilson  S.  Howell,  the 
testing  officer  in  charge  of  the  bureau  at  Harrison. 


6  ADDRESSES  OF  SAMUEL  INSULL 

RELATIONS  OF  OPERATING  AND  MANUFACTURING  COMPANIES 

Relations  of  the  Edison  licensees  with  the  Edison  Electric 
Light  Company  and  its  licensed  manufacturer,  the  General 
Electric  Company,  have  been  of  the  pleasantest  character 
during  the  last  year.  This  is  probably  owing  to  the  fact  that 
those  operating  the  General  Electric  Company  since  the  con- 
solidation of  the  Thomson-Houston  Company  and  the  Edison 
Electric  Company  have  had  fuller  opportunity,  as  time  has 
gone  by,  to  appreciate  the  importance  of  the  Edison  licensee 
business  to  the  patent-owning  and  manufacturing  interests. 
The  matter  of  patents  continues  to  be  in  far  from  a  satisfactory 
condition,  the  licensees  receiving  very  little  protection  in  the 
enjoyment  of  the  exclusive  privileges  under  the  Edison  patents 
which  they  had  every  reason  to  look  for  in  view  of  the  large 
amount  of  royalty  paid  by  them  to  the  parent  company.  It  is 
doubtful  whether  the  Edison  Electric  Light  Company  or  the 
General  Electric  Company  can  be  held  responsible  for  this  state 
of  affairs,  as  they  have  continued  to  spend  very  large  sums  of 
money  in  the  prosecution  of  their  patent  rights  in  the  courts. 

It  is  to  be  regretted  that  many  of  the  electrical  manufactur- 
ing companies  continue  to  foster  opposition  central-station 
plants,  in  territory  already  covered  by  good  paying  illuminating 
properties,  with  the  result  of  seriously  affecting  the  credit  of 
the  customers  upon  whom  the  manufacturers  must  rely  for 
trade,  if  they  desire  to  create  a  permanent  manufacturing 
business.  We  have  all  of  us  suffered  more  or  less  from  this 
policy  of  the  manufacturing  interests,  and  while  in  some  cases 
there  may  possibly  be  a  temporary  advantage  to  one  or  another 
manufacturer,  it  is  natural  for  us  to  wonder  what  permanent 
advantage  can  come  to  the  manufacturing  interests  as  a  whole 
by  the  adoption  of  methods  which  would  seem  to  have  in  view 
the  ultimate  destruction  of  the  goose  that  lays  the  golden  egg. 

VALUE  OF  EDISON  DISTRIBUTION  SYSTEM 

With  the  many  changes  that  must  of  necessity  take  place 
in  so  new  a  business  as  the  electric-light-and-power  industry, 


CENTRAL  STATIONS  IN   1897  7 

the  question  is  often  raised  as  to  whether  or  not  our  plant  is  of 
a  permanent  character.  A  close  examination  of  the  Edison 
system  must  bring  home  to  any  one  the  fact  that  the  wonderful 
inventive  and  engineering  talent  displayed  by  Mr.  Edison  in  his 
early  work  has  given  us  the  advantage  of  a  system  that  is  of 
the  utmost  permanency.  Our  main  investment,  in  the  larger 
cities  at  least,  is  in  our  underground  work,  and  if  you  will  look 
over  the  records  of  the  various  companies  using  the  Edison 
system,  I  think  you  will  find  that  their  underground  work  is  as 
useful  to  them  now  as  when  it  was  laid,  and  it  seems  to  me  that 
there  is  no  reason  for  us  to  fear  that  this  condition  will  change 
in  the  future.  We  may  have  different  methods  of  illumination; 
we  may  get  a  higher  voltage  lamp;  we  may  find  that  the  current 
of  the  future  will  not  require  as  large  a  cross-section  of  copper 
as  in  the  past;  but  I  doubt  if  we  will  find  that  any  method  of 
distribution  will  be  invented  that  will  supplant  that  which  we 
are  using;  and  if  such  be  the  case,  we  should  rather  welcome 
than  fear  new  inventions,  feeling  that  in  our  particular  cities 
we  are  the  most  desirable  purchasers  of  any  inventions  which 
may  lessen  the  cost  of  electrical  energy  to  our  customers. 

When  those  of  us  who  have  been  connected  with  this  great 
industry  from  its  early  childhood  recall  the  fact  that  scientists 
and  inventors  on  both  sides  of  the  Atlantic  persistently  con- 
demned the  scheme  originally  laid  out  by  Mr.  Edison,  we  must, 
as  central-station  managers  of  today,  feel  that  we  owe  a  deep 
debt  of  gratitude  to  him  for  his  courage  in  insisting  that  the 
only  practicable  method  of  distribution  of  electrical  energy 
was  by  the  use  of  a  constant  pressure  and  a  varying  current 
when  everybody  else  was  talking  a  constant  current  and  a 
varying  pressure.  With  every  desire  to  pay  tribute  to  the  many 
brilliant  men  who  have  contributed  to  the  success  of  the  business 
of  manufacturing  and  distributing  electrical  energy,  we  venture 
to  contend  that  their  work  is  all  subordinate  to  that  of  the 
master  mind  who  persisted  in  the  early  experimental  days  at 
Menlo  Park  in  working  on  a  multiple-arc  system,  without  which 
(with  the  exception  of  the  series  arc  light)  no  form  of  electric 
light  or  electrical  energy  could  be  commercially  operated  today. 


DEVELOPMENT    OF    THE    CENTRAL 
STATION1 

WHEN  requested  a  short  time  ago  by  the  chief  of  the 
electrical  department  of  this  university  to  deliver  a 
lecture  on  some  subject  connected  with  central-station 
work,  I  must  confess  to  some  misgivings  in  accepting  the  honor, 
remembering  the  hesitation  that  a  commercial  man  invariably 
feels  in  discussing  technical  matters  before  those  having  had 
technical  training.  Then  I  remembered  that  even  within  my 
own  time  (and  I  think  I  can  still  lay  claim  to  being  a  young 
man)  very  little  was  known  of  the  general  distribution  of 
electrical  energy  from  a  central  station.  Further,  when  I  re- 
called that  so  recently  as  the  early  eighties  it  was  necessarily 
the  rule  for  "guessing  to  be  a  substitute  for  mathematics"  (to 
use  the  words  of  the  great  pioneer  in  central-station  work),  my 
misgivings  began  to  disappear,  and  I  felt  encouraged  to  talk 
to  you  on  the  development  of  the  central  station  from  the  point 
of  view  of  my  own  experience  in  following  this,  the  latest  of 
the  great  industrial  developments  of  the  wonderful  era  in 
which  we  live. 

In  referring  to  the  development  of  the  central  station,  it 
would  seem  hardly  necessary  to  go  at  length  into  the  history  of 
the  business,  the  origin  of  which  probably  dates  from  the  work 
of  the  early  experimenters  whose  efforts  were  directed  to  the 
perfection  of  series  arc  lighting.  While  their  work  is  entitled 
to  the  greatest  possible  praise,  it  should  be  remembered  that 
the  theory  on  which  they  worked,  namely,  constant  current 

1.  A  lecture  delivered  on  May  17,  1898,  before  the  Electrical  Engineer- 
ing Department  of  Purdue  University,  Lafayette,  Ind.  This  address  is  not 
only  of  historical  value,  but  vigorous  and  far-seeing  in  treating  of  the  cost  of 
money,  load  factor,  the  tendency  of  rates  to  decrease  and  other  modern  studies. 
It  was  written  in  advance  and  read  from  manuscript. 

8 


CENTRAL-STATION  DEVELOPMENT  9 

and  varying  potential,  is  a  theory  foredoomed  to  failure,  when 
applied  to  the  development  of  a  system  of  general  distribution 
for  light  and  power  purposes,  the  first  essential  of  which  is  the 
necessity  for  a  constant  potential,  the  quantity  of  current 
varying  in  accordance  with  the  demands  made  by  those  desiring 
to  use  the  energy,  whether  for  light  or  power  purposes.  Nor 
does  it  seem  to  me  a  matter  very  pertinent  to  the  present  occa- 
sion to  trace  the  rival  claims  as  to  priority  of  invention  of  the 
early  experimenters  on  incandescent  lamps.  Which  of  them  was 
the  first  to  produce  a  lamp  that  could  be  brought  to  a  state  of 
incandescence  by  means  of  the  electric  current  is  hardly  within 
the  scope  of  our  inquiry.  Probably  all  of  them,  groping  in  the 
dark  (now  and  then  illumined  by  the  flashes  of  light  emitted 
from  their  experimental  glow  lamps),  contributed  in  a  more 
or  less  degree  to  the  perfection  of  the  incandescent  lamp  as 
now  in  everyday  use.  But  so  far  as  their  contributing  much 
that  is  substantial,  in  the  development  of  a  system  of  central- 
station  distribution,  it  is  probable  that,  up  to  the  year  1880, 
there  was  but  one  man  who  realized  that  in  solving  the  great 
problem  of  electrical  distribution  the  perfection  of  a  filament  of 
high  resistance,  which,  placed  in  a  hermetically  sealed  glass 
globe  from  which  the  air  had  been  exhausted,  and  connected 
in  multiple  arc  across  an  electric  circuit,  was  the  first  necessity 
to  the  distribution  of  electrical  energy  in  our  cities  from  a 
central-station  system. 

THE  HIGH-RESISTANCE  INCANDESCENT  LAMP 

In  Mr.  Edison's  application  for  a  United  States  patent  on  a 
system  of  electrical  distribution,  filed  at  Washington  on  Febru- 
ary 5,  1880,  he  says: 

The  translating  devices  for  each  house  may  be  either  for  light  or  power, 
or  both.  For  light,  the  electric  lamp,  consisting  of  an  incandescing  material 
hermetically  sealed  in  glass  (shown  in  other  applications  made  by  me)  is 
preferred.  This  lamp  is  made  of  a  high  resistance  in  comparison  with  that  of 
any  electric  lamps  which,  to  my  knowledge,  have  been  proposed.  In  lights 
heretofore  proposed  the  endeavor  seems  to  have  been  to  lessen  the  resistance 
of  the  carbon,  none  having  been  suggested  of  higher  resistance  than,  say,  10 
ohms;  but  I  have  discovered  that  a  very  much  higher  resistance,  say  100 
ohms,  must  be  used,  in  order  that  a  number  may  be  economically  and  success- 
fully used  in  a  system. 


10  ADDRESSES  OF  SAMUEL  INSULL 

The  question  of  the  high  resistance  of  the  translating  device 
was  the  first  stepping-stone  to  success.  Everybody  prior  to 
Edison  had  aimed  at  getting  a  low-resistance  lamp,  I  presume 
on  the  theory  that  the  less  the  resistance  of  one  the  less  the 
resistance  of  the  whole  series.  Edison  struck  out  on  new  lines. 
A  high-resistance  lamp  was  naturally  followed  by  a  multiple-arc 
system. 

In  writing  of  the  necessity  of  a  high-resistance  lamp,  the 
applicant  for  the  patent  had  in  mind  that  a  system  of  electrical 
distribution  could  be  used  at  the  same  time  not  only  for  lighting, 
but  for  power  purposes,  if  the  motors  were  properly  constructed, 
and  this  is  shown  by  the  next  paragraph  in  his  application,  which 
states : 

The  motors  should  be  so  constructed  that  each,  with  a  constant  flow  or 
pressure  of  current,  will  give  the  exact  power  required.  This  requires  that 
each  motor  should  be  wound  with  finer  or  coarser  wire,  and  into  more  or  less 
convolutions,  which  determine  the  maximum  effect  of  the  motor. 

If  you  will  search  the  files  of  the  daily  and  technical  journals, 
and  the  proceedings  of  various  scientific  societies  on  both  sides 
of  the  Atlantic  from  the  summer  of  1878  up  to  and  including  the 
year  1882,  you  will  find  that  the  great  obstacles  in  the  way  of  an 
economical  system  of  central-station  distribution  were  the 
difficulties  of  producing  a  lamp  that  would  last,  one  requiring 
only  a  minimum  of  current,  and  a  system  of  electrical  distribu- 
tion requiring  a  minimum  of  capital,  so  as  to  enable  electricity  to 
compete  with  then  existing  methods  of  illumination  and  power. 
Professor  Henry  Morton,  on  December  28,  1879,  says  in  the 
New  York  Times: 

The  first  difficulty  of  all  is  the  production  of  a  lamp  which  shall  be  thor- 
oughly reliable,  and  neither  complicated  nor  expensive.  All  attempts  up 
to  the  present  lamp  in  this  direction  are  acknowledged  to  be  failures,  and  as  I 
have  pointed  out,  there  does  not  seem  to  be  any  novelty  such  as  would  author- 
ize us  to  hope  for  better  success  than  the  present  one.  The  next  difficulty  is 
the  economical  production  of  small  lights  by  electricity.  This  is  what  is  com- 
monly meant  by  the  phrase,  "dividing  the  electric  light."  Up  to  the  present 
time,  and  including  Mr.  Edison's  latest  experiments,  it  appears  that  this 
involves  an  immense  loss  of  efficiency. 

Next  comes  the  difficulty  of  distributing  on  any  large  scale  the  immense 
electric  current  which  would  be  needed,  and  to  provide  for  their  equal  action 
at  different  points  under  varying  conditions  of  the  number  of  lights  used. 


CENTRAI^STATION  DEVELOPMENT  11 

"SUBDIVIDING  THE  ELECTRIC  LIGHT" 

Again  Mr.  Conrad  Cooke,  giving  evidence  before  the 
British  Parliamentary  Commission  in  1879,  in  answer  to  the 
question:  "Supposing  that  the  occupier  of  one  house  wished 
to  put  out  his  lights,  how  would  this  be  effected?"  replied: 

In  that  case,  if  you  throw  out  a  lamp  or  throw  out  a  house,  you  must 
throw  into  the  circuit  a  resistance  exactly  equal  to  what  you  cut  out.  If  you 
do  not  do  that,  you  will  affect  every  lamp  in  the  series  and  the  machine  as  well. 
If  you  put  out  your  lights  by  breaking  the  circuit,  you  put  out  every  light  in 
the  series. 

In  answer  to  another  question  at  the  same  parliamentary 
inquiry,  Mr.  Cooke  said  (referring  to  Dr.  William  Siemens,  who 
had  been  named  hi  the  question) : 

His  nephew  told  me  himself  that  he  had  seen,  I  think,  over  200  lamps  on 
one  of  Edison's  circuits. 

And  Mr.  Cooke  added: 

I  must  say  I  should  like  to  see  it  myself,  and  that  is  all  I  can  say. 

It  is  quite  evident  from  this  that  Conrad  Cooke,  very  well 
known  in  England  as  a  prolific  writer  on  the  subject  of  electrical 
experiments,  had  in  mind,  in  1879,  nothing  better  than  the  series 
system,  that  is  a  number  of  incandescent  lamps  run  precisely 
the  same  as  arc  lamps,  or,  to  put  it  another  way,  his  idea  of  the 
electric  lighting  system  was  a  varying  potential  and  a  constant 
current,  which  could  never  be  run  on  a  large  scale  successfully. 
Sir  William  Thomson  (Lord  Kelvin),  referring  to  the  same 
parliamentary  inquiry  of  1879,  says: 

I  had  not  myself,  at  that  time,  any  idea  leading  toward  the  practical  real- 
ization of  any  such  distribution  of  conductors  and  placing  the  lights  as  outlined 
in  the  Edison  mulitple  arc  and  feeder  system. 

Evidently  Mr.  Swan,  the  English  inventor,  had  no  idea 
of  the  feeder  system  as  late  as  October,  1880,  as  in  a  lecture 
before  the  Literary  and  Philosophical  Society  of  Newcastle, 
England,  at  that  time,  he  said : 

The  only  way  of  avoiding  this  waste  of  energy,  without  abandoning  the 
idea  of  small  units  of  light,  would  be  either  to  employ  enormously  thick  con- 
ductors, or  have  a  very  limited  area  supplied  from  one  source. 


12  ADDRESSES  OF  SAMUEL  INSULL 

Mr.  Swan  was  referring  to  Mr.  Edison's  plain  multiple-arc 
system,  as  set  forth  in  his  application  of  February,  1880.  The 
last  eight  words  of  this  quotation  prove  that  Mr.  Swan  did  not 
then  know  of  Mr.  Edison's  feeder  system,  application  for  patent 
on  which  was  made  on  the  9th  of  August,  1880,  and  was  patent- 
ed in  England  on  the  24th  of  September  of  the  same  year.  It 
would  seem  that  even  in  1882  Mr.  Swan,  who  himself  at  that 
time  must  have  been  informed  as  to  Mr.  Edison's  invention  of 
the  feeder  system,  could  not  have  appreciated  the  possibilities 
of  such  a  system,  as,  in  a  paper  communicated  to  the  British 
Association  at  Southampton  in  August  of  that  year,  he  said: 

The  only  escape  from  that  limitation  (extent  of  distribution)  lay  in  having 
secondary  batteries  at  stations  or  in  houses,  and  in  these  batteries  being  con- 
nected in  series,  and  fed  by  currents  of  higher  tension,  the  principle  still  hold- 
ing of  multiple  arc,  not  from  the  central  station,  but  from  the  subsidiary 
ones  from  which  the  batteries  are  charged.  Once  imagine  the  possibility  of 
these  secondary  batteries  being  kept  at  a  perfectly  constant  condition  of 
charge  by  some  automatic  arrangement,  and  we  might  look  to  that  as  a  means 
of  escaping  from  the  difficulties  of  wide  distribution. 

EARLY  DISCUSSION  IN  ENGLAND 

Again  we  find  that  Dr.  Siemens,  before  the  Society  of  Arts 
hi  London,  on  the  15th  of  November,  1882,  declared  that 

It  would  be  possible  to  establish  electrical  mains  in  the  shape  of  copper 
rods  of  great  thickness  with  branches  diverging  from  them  in  all  directions, 
though  he  was  himself  decidedly  averse  to  such  a  plan.  He  said  he  would 
limit  the  area  of  the  densely  populated  district  to  one  quarter  of  a  square  mile, 
notwithstanding  other  individuals  of  high  standing  in  electrical  circles  held 
that  areas  of  from  one  to  four  square  miles  could  be  worked  to  advantage. 

Dr.  Siemens  went  on  to  say: 

In  considering  the  proper  size  of  conductors,  two  principal  factors  have  to 
be  taken  into  account:  First,  the  charge  for  interest  and  depreciation  on  the 
original  cost  of  a  unit  length  of  the  conductor,  and  secondly,  the  cost  of  the 
electrical  energy  lost  through  the  resistance  of  a  unit  of  length.  The  sum  of 
these  two,  which  may  be  regarded  as  the  cost  of  the  conveyance  of  electricity, 
is  clearly  least,  as  Sir  William  Thomson  pointed  out  some  time  ago,  when  the 
two  components  are  equal.  This,  then,  is  the  principle  on  which  the  size  of  a 
conductor  should  be  determined. 

Sir  William  Thomson,  commenting  on  Dr.  Siemens'  remarks 
of  November  15,  1882,  before  a  commission  taking  evidence 
with  relation  to  the  Edison  feeder  patent,  said: 


CENTRAI^STATION  DEVELOPMENT  13 

There  is  not  a  word  here  of  the  necessity  to  secure  against  too  great  drop 
of  electric  potential  between  the  dynamo  and  the  lamps,  or  too  great  differ- 
ences of  drop  between  the  different  lamps  of  the  system,  and  the  narrow  limita- 
tion of  the  area  insisted  upon  shows  that  Dr.  Siemens  had  no  idea  of  Edison's 
solution  of  the  problem,  and  thought  only  of  overcoming  the  difficulty  by 
enormously  massive  copper  conductors  with  branches  diverging  from  them  to 
the  points  of  consumption.  From  his  earliest  commencement  as  an  inventor 
and  engineer,  Siemens  had  been  occupied  with  water  and  gas.  His  first  inven- 
tion was  a  water-meter,  and  it  is  not  probable  that  anyone  in  the  years  1879-80 
knew  better  than  he  did  of  the  difficulties  met  with  in  the  distribution  of 
water  and  gas  and  of  the  methods  which  had  been  practically  used  or  proposed 
for  overcoming  them. 

Again  referring  to  this  subject,  the  same  authority  said: 

About  that  time,  or  a  little  later,  one  of  our  first  electrical  engineers,  Mr. 
Crompton,  who  has,  in  fact,  been  the  first  to  introduce  successfully  and  on  a 
large  scale,  lighting  from  a  central  station  in  London,  told  me  that  he  was 
obliged  to  use  larger  copper  conductors  than  would  be  required  merely  in  accord- 
ance with  my  principle  for  economy,  in  order  to  avoid  so  great  a  drop  in  poten- 
tial as  would  be  inconsistent  with  the  good  working  of  the  lamps.  At  that 
time  he  had  no  idea  of  the  feeder  system,  which  he  has  since  adopted  with 
marked  success  in  the  Kensington-Knightsbridge  electric  lighting.  Siemens' 
solution  was  not  augmenting  the  size  of  the  conductors  above  that  calculated 
from  the  economic  law,  but  to  limit  the  size  of  the  station  supplied.  Neither 
this  nor  the  solution  first  proposed  by  Crompton  is  satisfactory  in  respect  to 
the  practical  demands  for  the  electric  lighting  of  towns.  Edison's  feeder  sys- 
tem is  now  universally  admitted  to  be  satisfactory  to  a  very  remarkable  degree. 
I  am  asked  why  did  not  some  one  else  invent  it.  The  only  answer  to  this,  the 
last  part  of  the  question,  that  I  can  think  of,  is  that  no  one  else  was  Edison. 

Well  do  I  remember  Sir  William  Thomson's  visit  to  the 
Pearl  Street  station  in  New  York,  in  1884,  when  he  saw  the 
Edison  feeder  system  first  in  operation,  and  the  great  interest 
that  he  exhibited  in  studying  it,  and  his  admiration  for  the  work 
accomplished  by  Mr.  Edison. 


VALUE  OF  EDISON'S  WORK 

I  have  thought  it  necessary  to  quote  at  length  some  of  the 
leading  English  authorities  on  electrical  matters,  as  I  thought 
it  would  be  better,  in  asserting  for  an  American  the  conception 
of  the  true  basis  of  electrical  distribution  for  light  and  power 
purposes,  to  give  you  the  opinion  and  views  on  the  matter  of 
distribution  of  our  "kin  beyond  the  sea"  rather  than  to  quote 
the  views  of  American  scientists  who  might  possibly  be  consid- 
ered more  partial  to  the  work  of  their  own  countryman. 


14  ADDRESSES  OF  SAMUEL  INSULL 

It  is  often  said  that  the  principles  of  constant-potential 
multiple-arc  distribution  and  the  use  of  feeders  to  maintain 
an  equal  and  economical  distribution  of  pressure  are  self- 
evident  propositions,  following  the  lines  of  gas  and  water  dis- 
tribution; but  when  you  have  such  high  authorities  as  Conrad 
Cooke  in  1879  failing  to  recognize  any  of  these  necessities,  of 
Mr.  Swan  in  1880  only  recognizing  the  principles  of  multiple 
arc,  and  in  1882  failing  to  recognize  the  importance  and  far- 
reaching  results  of  the  feeder  system,  and  Dr.  Siemens  as  late 
as  November,  1882,  two  months  after  a  central  station  was  in 
operation  in  New  York  city,  adopting  almost  the  same  views 
as  Mr.  Swan,  you  can  not  wonder  at  Lord  Kelvin  answering  the 
question  as  to  why  some  one  else  did  not  invent  the  feeder 
system  by  saying,  "The  only  answer  to  this,  that  I  can  think  of, 
is  that  no  one  else  was  Edison." 

It  would  seem  to  me,  with  such  authorities,  that  it  is  not 
unreasonable  to  contend  that  the  development  of  the  central 
station  and  distribution  system  connected  therewith  dates 
from  Mr.  Edison's  work  at  Menlo  Park.  Mr.  Edison  had  been 
engaged  during  the  early  seventies,  first  as  a  telegraph  operator 
in  the  Western  Union  service,  and  later  working  on  the  gold 
indicators  in  the  gold  room  in  New  Street,  New  York,  during 
the  stirring  period  of  speculation  in  the  precious  metal  which 
culminated  on  Black  Friday  in  1873.  Professor  C.  C.  Law, 
now  connected  with  the  University  of  Missouri,  had,  I  believe, 
charge  of  the  indicating  instruments,  and  it  is  a  matter  of  some 
interest  to  record  the  fact  that  the  first  work  Mr.  Edison  did 
of  an  inventive  character  which  yielded  him  a  financial  return 
was  in  connection  with  and  while  he  was  at  work  on  the  gold 
indicators  in  question.  Subsequently  he  was  employed  in  the 
interest  of  what  is  now  the  Western  Union  Telegraph  Company 
in  improving  the  now  universally  used  stock  ticker.  This  was 
followed  by  brilliant  and  successful  work  in  connection  with  the 
duplex  and  quadruplex  and  automatic  systems  of  telegraphy, 
and  the  invention  of  the  phonograph  and  that  part  of  the  tele- 
phone now  generally  used  for  transmitting  purposes  and  known 
as  the  carbon  transmitter.  His  attention  to  the  possibilities  of 


CENTRAI^STATION  DEVELOPMENT  15 

what  is  popularly  called  the  subdivision  of  the  electric  light  was 
probably  the  result  of  a  visit  he  paid  to  Mr.  William  Wallace 
at  Ansonia  in  the  fall  of  1878,  where  he  saw  some  experiments  on 
dynamo-electric  machines,  and  on  his  return  to  Menlo  Park  he 
started  his  experiments  on  a  system  of  electric  light  and  power, 
which  culminated  in  the  successful  starting  of  the  first  central 
station,  in  the  lower  portion  of  New  York  city  in  September, 
1882. 

THE  PANIC  IN  GAS  SHARES 

The  public  interest  aroused  in  Mr.  Edison's  work  and  the 
controversy  as  to  whether  it  was  possible  to  achieve  anything 
that  would  be  of  a  commercial  value  is  manifested  by  the  con- 
stant reference  to  the  matter  in  the  public  press  in  1878,  1879, 
and  1880,  resulting  in  a  panic  in  gas  securities  in  London  in  1878 
and  in  New  York  in  1879.  Probably  the  work  of  no  inventor 
was  more  generally  discussed  on  both  sides  of  the  Atlantic  by 
laymen  and  technical  authorities  alike  than  was  that  of  Mr. 
Edison  on  his  electric  lighting  and  power  system.  All  kinds  of 
comparisons  were  made  as  to  the  difference  between  the  cost 
of  gas  and  the  cost  of  electricity.  It  was  declared  by  some 
that  Mr.  Edison  could  not  possibly  be  considered  as  having 
succeeded  in  his  work  unless  he  could  produce  an  illuminant 
that  would  compete  commercially  with  gas.  These  objectors 
lost  sight  of  the  fact  that  the  characteristics  of  the  two  illumin- 
ants  were  quite  different,  and  that  there  was  no  more  reason  for 
supposing  that,  if  electricity  were  more  expensive  than  gas,1  the 
cost  would  be  a  barrier  to  its  use  any  more  than  there  is  reason 
for  supposing  that  gas  should  be  considered  a  commercial  failure 
because  the  poorest  classes  find  it  cheaper  to  use  tallow  dips. 

The  probable  reason  for  scientists  and  electricians  doubting 
the  possibility  of  a  successful  electric-lighting  system  being 
produced  was  that  all  previous  experimenting  on  incandescent 
lamps  had  been,  as  I  have  already  stated,  aiming  at  producing 
a  lamp  of  the  lowest  possible  resistance,  and  consequently 

1.  This  was  written,  of  course,  long  before  the  introduction  of  the  tungsten 
lamp  and  modern  methods  of  making  and  selling  electricity  had  brought  about 
the  present  low  price  of  electric  lighting. 


16  ADDRESSES  OF  SAMUEL  INSULL 

requiring  the  greatest  possible  amount  of  current,  these  lamps 
being  run  in  series,  whereas  Mr.  Edison,  at  a  comparatively 
early  stage  of  his  work,  realized  that  the  first  essential  was  a 
lamp  of  high  resistance,  and  that  the  only  way  of  approximating 
an  even  distribution  of  pressure  was  to  run  these  lamps  in  mul- 
tiple arc.  Hence  his  application  for  a  patent  on  a  lamp  with  a 
high-resistance  filament,  under  date  of  November  4,  1879,  and 
his  application  on  multiple-arc  distribution  in  February,  1880. 
It  was  then  but  a  short  time  before  he  realized  that,  although 
experimentally  this  might  give  him  even  pressure,  the  expense 
of  the  copper  in  his  distribution  system  would  be  too  great, 
owing  to  the  necessity  of  increasing  the  size  of  his  copper,  as 
he  got  farther  and  farther  from  the  point  of  generation.  The 
result  was  that  in  August,  1880,  he  applied  for  his  patent  on  a 
system  of  feeders  to  supply  his  system  of  mains  at  various  points 
throughout  the  system,  the  effect  being  a  compact  system  with 
current  flowing  in  all  directions  from  the  central  point  of  genera- 
tion through  feeders,  by  means  of  which  even  pressure  could  be 
maintained  throughout  a  considerable  area. 

UNDERGROUND  WORK  AND  THREE- WIRE  SYSTEM 

A  still  further  step  made  by  Mr.  Edison  was  the  realization 
that  nothing  very  reliable  in  the  way  of  a  distribution  system 
in  large  cities  could  be  maintained  unless  the  work  was  placed 
underground,  and,  as  a  result  of  his  work  of  a  little  over  two 
years,  we  find  that  in  the  early  winter  of  1880  Edison  had  a 
central-station  system  experimentally  at  work  at  Menlo  Park, 
N.  J.,  having  an  underground  two-wire  system,  with  the  homes 
of  himself  and  his  staff  electrically  illumined  by  incandescent 
lamps,  motors  at  work  in  his  laboratory,  and,  in  fact,  all  of  the 
essential  features  of  what  is  today  now  so  common  from  the 
largest  cities  to  the  smallest  villages  throughout  the  whole 
civilized  world. 

It  was  but  a  short  time  after  the  starting  of  the  first  central 
station,  in  New  York,  that  Mr.  Edison  found  himself  looking  for 
some  more  economical  methods  of  distribution;  and  I  well  re- 
member his  first  experiments  on  the  three- wire  system,  when,  at 


CENTRAL-STATION  DEVELOPMENT  17 

his  shop  in  Goerck  Street,  New  York,  he  placed  a  third  brush  on 
the  neutral  point  of  the  commutator  of  a  small  bipolar  Edison 
dynamo  and  demonstrated  the  practicability  of  the  three-wire 
system. 

At  the  same  time  that  Edison  was  working  on  the  three- 
wire  system  experimentally  in  New  York,  Dr.  John  Hopkinson 
was  probably  figuring  out  the  same  thing  in  England,  and 
Werner  von  Siemens  was  engaged  in  similar  work  in  Germany. 
The  records  of  the  United  States,  English,  and  German  patent 
offices  bear  witness  to  the  fact  that  these  three  men  accom- 
plished about  the  same  results  at  about  the  same  time,  and,  as 
a  consequence,  between  60  and  70  per  cent  of  the  investment 
in  copper  was  saved. 

It  is  not  my  wish  to  address  you  on  the  scientific  or  technical 
side  of  central-station  development.  I  have  thought  it  neces- 
sary to  go  at  length  into  the  early  work  of  the  art  for  the  purpose 
of  giving  you  some  idea  of  the  position  to  which  Mr.  Edison  is 
entitled  as  the  father  of  central-station  work.  My  limited 
knowledge  of  the  technique  of  the  business  would  not  permit 
me,  even  if  I  wished,  to  discuss  the  details  of  his  early  work,  or 
of  the  early  work  of  other  experimenters;  but  I  assure  you  that 
daily  familiarity  with  the  operation  of  one  of  the  largest  central 
stations  in  this  country  gives  me  a  higher  and  higher  apprecia- 
tion of  the  simplicity  and  thoroughness  and  adaptability  to 
all  purposes  of  electrical  distribution  of  the  great  work  accom- 
plished by  the  "Wizard  of  Menlo  Park." 

PEARL  STREET  STATION  IN  NEW  YORK 

As  a  result  of  the  experiments  at  Menlo  Park,  Mr.  Edison, 
early  in  the  winter  of  1880,  started  to  get  together  the  neces- 
sary data  for  the  establishment  of  a  central-station  and  dis- 
tributing system  in  New  York,  in  the  district  bounded  by  Wall 
Street  on  the  south,  Nassau  Street  on  the  west,  Peck's  Slip 
on  the  north,  and  South  Street  on  the  east,  a  territory  covering 
about  2,000  feet  square.  He  had  each  house  thoroughly 
canvassed  to  show  the  number  of  lights  in  use,  the  number  of 
hoistways  and  elevators,  and  the  horse-power  of  the  engines 


18  ADDRESSES  OF  SAMUEL  INSULL 

running  machinery.  As  a  result  of  this  canvass,  the  Edison 
Electric  Illuminating  Company  of  New  York  was  formed  and 
drawings  prepared  for  a  central  station,  which  was  erected  at 
255  and  257  Pearl  Street,  the  rating  of  the  station  being  2,000 
horse-power,  and  the  district  fed  by  a  system  of  half-round 
copper  mains  and  feeders,  the  mains  being  enclosed  in  lengths 
of  iron  pipe  and  insulated  by  a  bituminous  compound,  each 
length  of  main  being  between  twenty  and  twenty -one  feet,  so 
that  it  was  possible  to  take  off  a  service  at  each  house. 

Time  will  not  permit  me  to  go  into  the  details  of  construction 
of  this,  the  first  central  distribution  system.  The  boilers  were 
placed  below  the  engine  floor  and  were  of  the  horizontal  water- 
tube  type,  made  by  Babcock  &  Wilcox,  carrying  a  pressure  of 
125  Ibs.,  the  steam  machinery  and  dynamos  being  of  the  direct- 
connected  type  and  placed  on  a  steel  structure  not  dissimilar 
to  that  of  some  portions  of  the  elevated-railroad  structure  in 
New  York. 

Great  care  was  taken  in  figuring  out  the  system  of  mains 
and  feeders,  an  immense  map  of  the  district  showing  the  prob- 
able consumption  of  current  in  the  various  parts  of  the  territory. 
It  should  be  remembered  that  the  path  to  be  followed  was 
practically  unknown;  that  electrical  distribution  on  a  large 
scale  was  as  much  of  a  hidden  secret  as  an  unexplored  continent. 
The  remarkable  thing  is  that  this  first  experimental  system 
was  a  practical  success,  and  a  return  on  the  money  invested 
was  being  earned  before  electricians  at  home  and  abroad  would 
recognize  the  success  of  the  undertaking.  It  is  but  natural 
to  find  that  many  devices  were  used  which  were  subsequently 
discarded.  For  instance,  an  elaborate  system  of  resistances 
placed  in  series  with  the  feeders  was  employed  for  maintaining 
an  even  pressure,  entailing  a  considerable  waste  of  energy. 
The  lamp  employed  was  not  more  than  one-half  as  efficient  as 
that  used  today1  while  the  cost  of  manufacture  was  many  times 

1.  Mr.  Insull  was  speaking,  of  course,  of  the  carbon-filament  lamp  as 
developed  in  1898.  A  comparison  between  the  pioneer  lamps  of  1880-1881 
and  the  tungsten  lamps  of  today  (1915)  would  be  still  more  marked.  Prob- 
ably the  early  lamps  were  not  more  than  one-sixth  as  efficient  as  those  now 
in  everyday  use. 


CENTRAL-STATION  DEVELOPMENT  19 

greater,  and  it  had  not  one-quarter  of  the  life  of  the  present 
commercial  incandescent  lamp. 

CONDITION  OF  THE  ART  IN  1880 

It  might  be  well  to  pause  for  a  moment  and  picture  the 
condition  of  the  art  at  that  time.  I  refer  to  the  winter  of  1880. 
The  plans  for  the  central  station  were  completed;  the  details  of 
construction  of  the  conductors  hi  the  street  were  all  on  paper; 
the  dynamos  and  electrical  instruments  had  no  existence  except 
on  the  draughting  board;  practically  nothing  was  known  of 
modern  methods  of  insulation  or  house- wiring;  the  socket  and 
switch  in  use  today  had  not  been  thought  of,  the  miscellaneous 
devices  now  considered  necessary  in  connection  with  house-wir- 
ing had  not  been  considered.  In  addition  to  the  development 
of  the  system  and  its  installation,  manufacturing  establish- 
ments had  to  be  created  in  which  to  manufacture  the  first 
material  needed,  and  Mr.  Edison  and  his  corps  of  assistants 
had  to  abandon  the  experiments  of  the  laboratory  and  the  de- 
signing of  the  draughting-room  to  equip  and  manage  shops  in 
which  to  manufacture  the  apparatus  necessary,  from  the  gen- 
erator to  the  lamp.  Others  have  followed  the  beaten  track, 
others  have  improved  upon  the  metho.ds  employed,  but  the 
conception  of  the  system,  the  perfecting  of  the  original  appara- 
tus, its  manufacture,  its  installation,  and  its  early  operation 
were  all  borne  by  an  enthusiastic  but  small  band  of  workers 
having  an  almost  idolatrous  belief  in  their  chief  as  the  pioneer 
of  this  great  industry. 

I  have  brought  with  me  tonight  a  photograph  of  the 
original  direct-connected  steam  generator  known  as  the  "Jum- 
bo" machine,  used  in  the  Pearl  Street  station,  composed  of  an 
engine  manufactured  by  Armington  &  Sims  of  Providence,  R.  I., 
of  the  single-cylinder  type,  running  at  a  speed  of  350  revolu- 
tions, with  what  is  practically  the  old  form  of  Edison  bipolar 
machine  changed  from  a  vertical  to  a  horizontal  position.  The 
armature,  instead  of  being  wound  with  coils  of  wire,  was  built 
up  of  copper  disks  and  bars.  If  you  will  glance  from  this  to  the 
picture  of  a  modern  central  station  unit  composed  of  a  com- 


20  ADDRESSES  OF  SAMUEL  INSULL 

pound,  triple,  or  quadruple-expansion  engine,1  with  a  multi- 
polar  dynamo  connected  directly  on  the  engine  shaft,  you  will 
find  that  the  same  broad  engineering  idea  is  alike  apparent 
in  the  earliest  and  latest  central-station  unit.  The  improve- 
ments in  dynamo  manufacture  have  enabled  us  to  use  lower 
speed  engines,  but  the  broad  principle  of  direct  connection  is 
alike  the  same  in  both.  That  we  should  come  back  to  exactly 
what  Mr.  Edison  used  in  the  earliest  central-station  work  is  no 
mean  tribute  to  him  as  an  engineering  authority. 

The  delay  which  necessarily  occurs  in  carrying  every  new 
enterprise  to  a  financial  success  acted  as  a  wet  blanket  on 
central-station  development.  Efforts  were  made  to  cheapen 
construction  when  it  was  found  that  capitalists  in  large  cities 
were  unprepared  to  risk  their  money  in  the  enterprise.  The 
apparatus  was  adapted  to  the  requirements  of  smaller  com- 
munities, and,  as  a  result,  a  number  of  small  stations  were 
established  throughout  the  country,  especially  in  Pennsylvania, 
Ohio,  and  Massachusetts.2  The  development  of  the  central- 
station  business  for  several  years  was  confined  to  this  class  of 
work.  The  service  was  far  from  reliable,  owing  mainly  to  the 
necessity  of  doing  the  cheapest  possible  engineering  and  con- 
struction in  order  to  meet  the  necessities  of  the  slim  exchequers 
of  those  who  were  bold  enough  to  embark  their  capital  in  this 
business;  but  the  Pearl  Street  station,  started  on  September  5, 
1882,  with  5,500  lamps,  rapidly  developed,  and  in  the  fourteenth 
month  of  continuous  running  had  508  customers,  wired  for 
12,732  lamps.  Comparatively  little  work  was  done  in  central- 
station  lighting  in  Europe.  A  small  station  was  started  in 
Dijon,  France,  in  June,  1883,  and  in  the  same  year  installa- 
tions were  made  in  Santiago,  Chile;  Milan,  Italy;  on  Holborn 
Viaduct,  London,  and  in  Manchester,  England. 

1.  This  was  before  the  day  of  the  steam  turbine  in  electric  generating- 
station  design.     See  illustrations  of  the  "Jumbo"  machine  and  of  the  Harrison 
Street  (Chicago)  generating  station  of  1898  (with   triple-expansion  engines) 
in  the  chapter  entitled  "A  Quarter-Century  Central-Station  Anniversary  Cele- 
bration in  Chicago,"  beginning  on  page  316. 

2.  A  small  station  in  Appleton,  Wis.,  was  opened  about,  or  a  little  before, 
the  time  of  the  opening  of  the  Pearl  Street  station. 


CENTRAI^STATION  DEVELOPMENT  21 

How  THE  IDEA  SPREAD 

The  success  of  the  Pearl  Street  station  resulted  in  the  ex- 
tension of  the  New  York  system  and  the  building  of  two  stations 
up-town  in  New  York,  one  in  Twenty-sixth  Street,  and  the 
other  in  Thirty -ninth  Street.  This  was  followed  by  a  station 
in  Boston  and  another  in  Brooklyn.  In  1887  the  building  of  the 
first  station  in  Chicago  was  started,  the  average  load,  as  shown 
by  the  composite  ampere  curves  of  that  station,  being  not  much 
over  500  amperes  for  the  year  1888.  These  latter  stations — the 
two  in  New  York,  the  one  in  Boston  and  the  one  in  Chicago — • 
were  equipped  with  high-speed  engines  belted  to  Edison  bipolar 
dynamos  of  the  Siemens  armature  type,  in  some  cases  the  en- 
gines and  dynamos  being  on  the  same  floor,  in  other  cases  the 
engines  being  belted  to  the  dynamos  on  the  floor  above.  Nu- 
merous other  stations  were  started,  so  that  by  1890  upwards  of 
sixty  cities  were  equipped  with  the  direct-current  low-tension 
system,  all  of  which,  and  numerous  others,  are  today  so  remu- 
nerative that  their  securities  are  considered  among  the  most 
desirable  local  investments,  especially  in  cities  of  the  first  and 
second  rank. 

The  success  of  the  low-tension  system  was  followed  by 
the  introduction  of  the  alternating-current  system,  using  high- 
potential  primaries  with  transformers  at  each  house,  reducing, 
as  a  rule,  from  1,000  down  to  either  50  or  100  volts.  I  am  not 
familiar  with  the  early  alternating  work,  and  had  not  at  my 
disposal  sufficient  time  in  preparing  my  notes  to  go  at  any 
length  into  an  investigation  of  this  branch  of  the  subject;  nor 
do  I  think  that  any  particular  advantage  could  have  been  served 
by  my  doing  so,  as  it  has  become  generally  recognized  that  the 
early  alternating  work  with  a  house-to-house  transformer 
system,  while  it  undoubtedly  helped  central-station  develop- 
ment at  the  time,  proved  very  uneconomical  in  operation  and 
expensive  in  investment,  when  the  cost  of  transformer  is  added 
to  the  cost  of  distribution.  The  large  alternating  stations  in 
this  country  have  so  clearly  demonstrated  this  that  their  re- 
sponsible managers  have,  within  the  last  few  years,  done  every- 


22  ADDRESSES  OF  SAMUEL  INSULL 

thing  possible,  by  the  adoption  of  block  transformers  and  three- 
wire  secondary  circuits,  to  bring  their  system  as  close  as  they 
could  in  practice  to  the  low-tension  direct-current  distribution 
system.  I  do  not  want  to  be  understood  as  undervaluing  the 
position  of  the  alternating  current  in  central-station  work. 
It  has  its  place,  but  to  my  mind  its  position  is  a  false  one 
when  it  is  used  for  house-to-house  distribution  with  trans- 
formers for  each  customer. 

The  success  of  the  oldest  stations  in  this  country  and  the 
demonstration  of  the  possibilities  of  covering  areas  of  several 
miles  in  extent  by  the  use  of  the  three-wire  system  resulted  in 
much  capital  going  into  the  business.  One  of  the  earliest  sta- 
tions of  a  really  modern  type  installed  on  either  side  of  the 
Atlantic  was  built  by  the  Berlin  Electricity  Works.  The 
engineers  of  that  station,  while  recognizing  the  high  value  of 
the  distributing  system,  went  back  to  Edison's  original  scheme 
of  a  compact  direct-connected  steam  and  electric  generator, 
but  with  dynamos  of  the  multipolar  type  designed  and  built  by 
Siemens  &  Halske  of  Berlin,  the  engines  being  of  vertical  marine 
type.  This  was  followed  by  the  projecting  in  New  York  of  the 
present  Duane  Street  station,  employing  boilers  of  200  pounds 
pressure,  triple  and  quadruple-expansion  engines  of  the  marine 
type,  and  direct-connected  multipolar  dynamos.  Almost  im- 
mediately thereafter  the  station  in  Atlantic  Avenue,  Boston, 
somewhat  on  the  same  general  design  so  far  as  contents  is 
concerned,  was  erected.  In  1891  a  small  station,  but  on  the 
same  lines,  was  projected  for  San  Francisco,  and  in  1892  the 
present  Harrison  Street  station1  of  the  Chicago  Edison  Company 
was  designed,  and,  benefiting  by  the  experience  of  Berlin,  New 
York  and  Boston,  this  station  produces  electricity  for  lighting 
purposes  probably  cheaper  than  any  station  of  a  similar  size 
anywhere  in  this  country. 

ALTERNATING-DlRECT-CURRENT   COMBINATION 

To  go  back  to  the  question  of  alternating  currents,  the 
work  done  in  connection  with  the  two-phase  and  three-phase 

1.  Now  (1915)  considered  obsolete  and  held  in  reserve  or  used  as  a  sub- 
station. 


CENTRAL-STATION  DEVELOPMENT  23 

currents  and  the  perfection  of  the  rotary  converter  has 
resulted  in  introducing  into  central-station  practice  a  further 
means  of  economizing  the  cost  of  production  by  concentration 
of  power.  According  to  present  experience,  it  is  (except  in 
some  extraordinary  cases)  uneconomical  to  distribute  direct 
low-tension  energy  over  more  than  a  radius  of  a  mile  and  a 
half  from  the  generating  point.  The  possibility  of  transmitting 
it  at  a  very  high  voltage,  and  consequently  low  investment  in 
conductors,  has  resulted  in  the  adoption  of  a  scheme,  in  many 
of  the  large  cities,  of  alternating  transmission  combined  with 
low-tension  distribution.  The  limit  to  which  this  alternating 
transmission  can  be  economically  carried  has  not  yet  been  defi- 
nitely settled,  but  it  is  quite  possible  even  now  to  transmit 
economically,  from  the  center  of  any  of  our  large  cities  to  the 
distant  suburbs,  by  means  of  high-potential  alternating  currents, 
distributing  the  energy  from  the  sub-center  distribution  by 
means  either  of  the  alternating  current  itself  and  large  trans- 
formers for  a  block  or  district,  or  else  if  the  territory  is  thickly 
settled,  by  means  of  a  system  of  low-tension  mains  and  feeders, 
the  direct  current  for  this  purpose  being  obtained  through  the 
agency  of  rotary  converters. 

There  are  various  methods  of  producing  the  alternating 
current  for  transmission  purposes.  In  some  cases  the  gener- 
ators are  themselves  wound  for  high  potential;  in  others  they 
are  wound  for,  say,  80  volts,  and  step-up  transformers  are  used, 
producing  whatever  pressure  is  desired,  from  1,000  to  10,000 
volts.  In  other  cases  dynamos  are  used  having  collector  rings 
for  alternating  current  on  one  side  and  a  commutator  for  direct 
current  on  the  other  side  of  the  armature,  thus  enabling  the 
operator,  when  the  peak  in  two  districts  of  a  city  comes  at  two 
different  times,  to  take  care  of  this  peak  by  means  of  the  same 
original  generating  unit,  furnishing  direct  low-tension  current  to 
the  points  near  the  central  station,  and  alternating  current  to 
the  distant  points.  In  other  cases,  where  a  small  amount  of 
alternating  current  is  required  on  the  transmission  line,  it 
has  even  been  found  economical  to  take  direct  current  from 
a  large  unit,  change  it  by  means  of  a  rotary  converter  into 


24  ADDRESSES  OF  SAMUEL  INSULL 

alternating  current,  step  up  from  80  to,  say,  2,000  volts,  go  to 
the  distant  point,  and  step  down  again  to  80  volts  alternating, 
and  then  convert  again  by  means  of  a  rotary  converter  into 
low-potential  direct  current. 

The  introduction  of  alternating  current  for  transmission 
purposes  in  large  cities  is  probably  best  exemplified  by  the 
station  recently  erected  in  Brooklyn,  whence  alternating  current 
is  produced  and  carried  to  distant  points,  and  then  used  to 
operate  series  arc-light  machines  run  by  synchronous  motors, 
the  low-tension  direct-current  network  being  fed  by  rotary 
converters,  and  alternating  circuits  arranged  with  block  trans- 
formers, and  even  in  some  cases  separate  transformers,  for  each 
individual  customer  in  the  scattered  districts. 

THE  MOST  SERIOUS  PROBLEM  IN  CENTRAL-STATION 
MANAGEMENT 

Passing  from  a  review  of  central-station  plants  and  dis- 
tribution systems  naturally  brings  us  to  the  operating  cost  and 
the  factors  governing  profit  and  loss  of  the  enterprise.  In  con- 
sidering this  branch  of  the  subject,  I  will  confine  my  remarks 
to  the  business  as  operated  in  Chicago  by  the  company  with 
which  I  am  connected. 

Our  actual  maximum  last  winter  came  on  the  20th  of 
December,  our  load  being  approximately  12,000  horse-power.1 
A  comparison  of  the  figures  of  maximum  capacity  and  maximum 
load  of  last  winter  shows  that  we  had  a  margin  in  capacity  over 
output  of  about  20  per  cent.  The  load  curves  represent  the 
maximum  output  of  last  winter  (December  20th),  an  average 
summer  load  last  year  (June  4th),  and  an  average  spring  load 
of  this  year  (May  2d).  For  our  purposes  we  will  assume  the 
maximum  capacity  of  the  plant  and  the  maximum  load  of  the 
system  to  be  identical.  The  maximum  load  last  winter  oc- 
curred, as  I  have  stated,  on  December  20th,  about  4 :30  o'clock 

1.  For  comparison  it  may  be  mentioned  that  the  maximum  demand  on 
the  Commonwealth  Edison  Company,  successor  to  the  Chicago  Edison  Corn- 
Company,  was  306,200  kilowatts  (about  410,000  horse-power)  on  December 
15,  1914.  This  shows  that  in  a  period  of  seventeen  years  the  maximum  de- 
mand increased  thirty-four  times. 


CENTRAL-STATION  DEVELOPMENT  25 

in  the  afternoon,  and  lasted  less  than  half  an  hour.  It  should 
be  borne  in  mind  that  the  period  of  maximum  load  only  lasts 
for  from  two  to  three  months,  and  that  the  investment  necessary 
to  take  care  of  that  maximum  load  has  to  be  carried  the  whole 
year.  It  should  not  be  assumed  from  this  statement  that  the 
whole  plant  as  an  earning  factor  is  in  use  25  per  cent  of  the 
year.  The  fact  is  that,  during  the  period  of  maximum  load, 
the  total  plant  is  in  operation  only  about  100  hours  out  of  the 
8,760  hours  of  the  year;  so  that  you  are  compelled,  in  order  to 
get  interest  on  your  investment,  to  earn  the  interest  for  the 
whole  of  the  year  in  about  1.5  per  cent  of  that  period,  on  about 
50  per  cent  of  your  plant. 

This  statement  must  bring  home  to  you  a  realization  of 
the  fact  that  by  far  the  most  serious  problem  of  central-station 
management,  and  by  far  the  greatest  item  of  cost  of  the  product, 
is  interest  on  the  investment.  It  may  be  that  the  use  of  storage 
batteries  in  connection  with  large  installations  will  modify  this 
interest  charge,  but  even  allowing  the  highest  efficiency  and  the 
lowest  cost  of  maintenance  ever  claimed  for  a  storage-battery 
installation,  the  fact  of  high-interest  cost  must  continue  to  be 
the  most  important  factor  in  calculating  profit  and  loss.  This 
brings  home  to  us  the  fact  that  in  his  efforts  to  show  the  greatest 
possible  efficiency  of  his  plant  and  distribution  system,  it  is 
quite  possible  that  the  station  manager  may  spend  so  much 
capital  as  to  eat  up  many  times  over  in  interest  charge  the  sav- 
ing that  he  makes  in  direct  operating  expenses.  It  is  a  com- 
mon mistake  for  the  so-called  expert  to  demonstrate  to  you 
that  he  has  designed  for  you  a  plant  of  the  highest  possible 
efficiency,  and  at  the  same  time  for  him  to  lose  sight  of  the 
fact  that  he  has  saddled  you  with  the  highest  possible  amount 
of  interest  on  account  of  excessive  investment.  Operating 
cost  and  interest  cost  should  never  be  separated.  One  is  as 
much  a  part  of  the  cost  of  your  energy  as  the  other.  This  is 
particularly  illustrated  in  connection  with  the  use  of  storage 
batteries.  Those  opposed  to  their  use  will  point  out  to  you  that 
of  the  energy  going  into  the  storage  battery  only  70  per  cent 
is  available  for  use  on  your  distribution  system.  That  state- 


26  ADDRESSES  OF  SAMUEL  INSULL 

ment  in  itself  is  correct;  but  in  figuring  the  cost  of  energy  for  a 
class  of  business  for  which  the  storage  battery  is  particularly 
adapted,  the  maximum  load,  that  portion  of  your  operating 
cost  affected  by  the  30  per  cent  loss  of  energy  in  the  battery, 
forms  under  4.5  per  cent  of  your  total  cost,  and  it  must  be 
self-evident,  in  that  case  at  least,  that  the  30  per  cent  loss  in 
the  storage  battery  is  hardly  an  appreciable  factor  in  figuring 
the  operating  cost  of  your  product.  So  far  as  I  have  been  able 
to  ascertain,  it  would  appear  to  be  economical  to  use  storage 
batteries  in  connection  with  central-station  systems  the  peak 
of  whose  load  does  not  exceed  from  two  to  two  and  one-half 
hours. 

INFLUENCE  OF  INTEREST  ON  COST 

In  order  to  illustrate  the  important  bearing  which  interest 
has  on  cost,  I  have  prepared  graphical  representations  [not 
shown]  of  the  cost  of  electricity,  including  interest,  under  condi- 
tions of  varying  load  factors.  For  the  purpose  of  this  chart  I 
have  assumed  an  average  cost  of  energy,  so  far  as  operating 
and  repairs  and  renewals  and  general  expense  are  concerned, 
extending  over  a  period  of  a  year,  although  of  course  these  items 
are  more  or  less  affected  by  the  character  of  the  load  factor.  For 
the  purpose  of  figuring  interest,  I  have  selected  seven  different 
classes  of  business  commonly  taken  by  electric-light-and-power 
companies  in  any  large  city.  Take,  for  instance,  an  office  build- 
ing. It  has  a  load  factor  of  about  3.7  per  cent;  that  is,  the  aver- 
age load  for  the  whole  year  is  3.7  per  cent  of  the  maximum  de- 
mand for  electricity  at  any  one  time  during  that  period;  or, 
to  put  it  another  way,  this  load  factor  of  3.7  per  cent  would 
show  that  your  investment  is  in  use  the  equivalent  of  a  little  over 
323  hours  a  year  on  this  class  of  business.  This  is  by  no  means 
an  extreme  case.  You  can  find  in  almost  every  large  city  cus- 
tomers whose  load  factors  are  not  nearly  as  favorable  to  the 
operating  company,  their  use  of  your  investment  being  as  low 
as  the  equivalent  of  75  or  100  hours  a  year.  Take  another  class 
of  business,  that  of  the  haberdasher,  or  small  fancy -goods  store. 
As  a  rule  these  stores  are  comparatively  small,  with  facilities  for 


CENTRAI^-STATION  DEVELOPMENT  27 

getting  a  large  amount  of  natural  light  and  little  use  for  artificial 
light.  The  load  factor  is  about  7  per  cent,  the  use  of  the 
investment  being  not  quite  twice  as  long  as  that  of  the  office 
building.  Day  saloons  show  an  average  of  16  per  cent  load 
factor;  cafetierias  and  small  lunch  counters  about  20  per  cent, 
while  the  large  dry -goods  stores,  in  which  there  is  comparatively 
little  light,  have  a  load  factor  of  25  per  cent  and  use  the  in- 
vestment seven  times  as  long  per  year  as  the  office  building. 
Industrial  business  naturally  shows  a  still  better  load  factor, 
say  35  per  cent,  and  the  all-night  restaurant  has  a  load  factor 
of  48  per  cent. 

THE  QUESTION  OF  LOAD  FACTOR 

You  will  see  from  this  that  the  great  desideratum  of  the 
central-station  system  is,  from  the  investors'  point  of  view, 
the  necessity  of  getting  customers  for  your  product  whose  busi- 
ness is  of  such  a  character  as  to  call  for  a  low  maximum  and 
long  average  use.  This  question  of  load  factor  is  by  all  means 
the  most  important  one  in  central-station  economy.  If  your 
maximum  is  very  high  and  your  average  consumption  very  low, 
heavy  interest  charges  will  necessarily  follow.  The  nearer  you 
can  bring  your  average  to  your  maximum  load  the  closer  you 
approximate  to  the  most  economical  conditions  of  production, 
and  the  lower  you  can  afford  to  sell  your  current.  Take,  for 
instance,  summer  and  whiter  curves  of  the  Chicago  Edison 
Company.  The  curve  of  December  20,  1897,  shows  a  load 
factor  of  about  48  per  cent;  the  curve  of  May  2,  1898,  shows  a 
load  factor  of  nearly  60  per  cent.  Now,  if  we  were  able  in 
Chicago  to  get  business  of  such  a  character  as  would  give  us  a 
curve  of  the  same  characteristics  in  December  as  the  curve  we 
get  in  May,  or,  in  other  words,  if  we  could  improve  our  load 
factor,  our  interest  cost  would  be  reduced,  an  effect  would  be 
produced  upon  the  other  items  going  to  make  up  the  cost  of 
energy,  and  we  probably  could  make  more  money  out  of  our 
customers  at  a  lower  price  per  unit  than  we  get  from  them  now. 

Many  schemes  are  employed  for  improving  the  load  factor, 
or,  in  other  words,  to  encourage  a  long  use  of  central-station 


28  ADDRESSES  OP  SAMUEL  INSULL 

product.  Some  companies  adopt  a  plan  of  allowing  certain 
stated  discounts,  providing  the  income  per  month  of  each  lamp 
connected  exceeds  a  given  sum.  The  objection  to  this  is  that 
it  limits  the  number  of  lamps  connected.  Other  companies 
have  what  is  known  as  the  two-rate  scheme,  charging  one  rate 
for  electricity  used  during  certain  hours  of  the  day  and  a  lower 
rate  for  electricity  used  during  the  remainder  of  the  day,  using 
a  meter  with  two  dials  for  this  purpose.  Other  companies  use 
an  instrument  which  registers  the  maximum  demand  for  the 
month,  and  the  excess  over  the  equivalent  of  a  certain  specified 
number  of  hours  monthly  in  use  of  the  maximum  demand  is 
sold  at  greatly  reduced  price.  The  last  scheme  would  seem  par- 
ticularly equitable,  as  it  results  in  what  is  practically  an  auto- 
matic scale  of  discounts  based  on  the  average  load  factor  of  the 
customers.  It  does  not  seem  to  be  just  that  a  man  who  only 
uses  your  investment,  say,  100  hours  a  year  should  be  able  to 
buy  your  product  at  precisely  the  same  price  as  the  man  who 
uses  your  investment,  say,  3,000  hours  a  year,  when  the  amount 
of  money  invested  to  take  care  of  either  customer  is  precisely 
the  same.  Surely  the  customer  who  uses  the  product  on  an 
average  thirty  times  longer  than  the  customer  using  it  for  only 
100  hours  is  entitled  to  a  much  lower  unit  rate,  in  view  of  the 
fact  that  the  expense  for  interest  to  the  company  is  in  one  case 
but  a  fraction  per  unit  of  output  of  what  it  is  in  the  other. 

Suppose  that  the  central-station  manager  desired  to  sell 
his  product  at  cost,  that  is,  an  amount  sufficient  to  cover  his 
operating,  repairs,  and  renewals,  general  expense,  and  interest 
and  depreciation.  He  would  have  to  obtain  from  the  customer 
having  the  poorest  load  factor,  as  shown  on  the  load  chart, 
over  four  times  as  much  per  unit  of  electricity  as  it  would  be 
necessary  for  him  to  collect  from  the  customer  having  the 
largest  load  factor.  No  one  would  think  of  going  to  a  bank  to 
borrow  money  and  expect  to  pay  precisely  the  same  total 
interest  whether  he  required  the  money  for  one  month  or  for 
twelve;  and  for  the  same  reason  it  seems  an  absurdity  to  sell 
electricity  to  the  customer  who  uses  it  but  a  comparatively  few 
hours  a  year  at  the  same  price  at  which  you  would  sell  it  to  the 


CENTRAL-STATION  DEVELOPMENT  29 

customer  using  it  ten  hours  a  day  and  three  hundred  days  a 
year,  when  it  is  remembered  that  interest  is  the  largest  factor  in 
cost,  and  the  total  amount  of  interest  is  the  same  with  the 
customer  using  it  but  a  few  hours  a  year  as  it  is  with  the  cus- 
tomer using  it  practically  all  the  year  around. 

THE  COST  OF  MONEY 

I  have  dwelt  thus  at  length  on  the  question  of  interest 
cost  in  operating  a  central-station  system,  not  alone  for  the 
purpose  of  pointing  out  to  you  its  importance  in  connection 
with  an  electrical  distribution  system,  but  also  to  impress 
upon  you  its  importance  as  a  factor  in  cost;  in  fact,  the  most 
important  factor  in  cost  in  any  public-service  business  which  you 
may  enter  after  leaving  this  institution.  Most  of  the  businesses 
presenting  the  greatest  possibilities  from  the  point  of  view  of  an 
engineering  career  are  those  requiring  very  large  investment 
and  having  a  comparatively  small  turn-over  or  yearly  income. 
Of  necessity  in  all  enterprises  of  this  character,  the  main  factor 
of  cost  is  interest,  and  if  you  intend  following  engineering  as  a 
profession,  my  advice  to  you  would  be  to  learn  first  the  value  of 
money,  or,  to  put  it  another  way,  to  learn  the  cost  of  money. 

Before  leaving  this  question  of  interest  and  its  effect  upon 
cost,  I  would  draw  your  attention  to  the  fact  that  while  interest 
is  by  far  the  most  important  factor  of  cost,  it  is  a  constantly 
reducing  amount  per  unit  of  maximum  output  in  practically 
every  central-station  system.  When  a  system  is  first  installed, 
it  is  the  rule  to  make  large  enough  investment  in  real  estate  and 
buildings  to  take  care  of  many  times  the  output  obtained  hi  the 
first  year  or  so  of  operation.  As  a  rule  the  generating  plant, 
from  the  boilers  to  the  switchboard,  is  designed  with  only 
sufficient  surplus  to  last  a  year  or  so.  In  the  case  of  the  dis- 
tributing system  the  same  course  is  followed  as  in  the  case  of 
real  estate  and  buildings,  with  a  view  to  minimizing  the  ultimate 
investment.  Mains  are  laid  along  each  block  facing,  feeders 
are  put  in  having  a  capacity  far  beyond  the  necessity  of  the 
moment,  consequently  interest  cost  is  very  high  when  a  plant 


30  ADDRESSES  OF  SAMUEL  INSULL 

first  starts,  except,  as  I  have  stated,  in  the  case  of  the  machinery 
forming  the  generating  plant  itself. 

As  the  business  increases  from  year  to  year  the  item  of 
interest  per  unit  of  maximum  output  will  constantly  decrease 
in  consequence,  owing  to  the  fact  that  each  additional  unit  of 
output  following  an  increase  of  connected  load  increases  the 
divisor  by  which  the  total  interest  is  divided.  The  result  is 
that  from  year  to  year  the  interest  cost  of  each  additional  unit 
of  maximum  output  is  a  constantly  reducing  amount,  and  con- 
sequently the  average  interest  cost  of  each  unit  of  maximum 
output  should,  in  a  well-regulated  plant,  grow  less  from  year 
to  year  until  the  minimum  interest  cost  per  unit  is  reached. 
This  minimum  interest  cost  is  reached  when  the  capacity  of  the 
whole  system  and  the  total  units  of  output  at  maximum  load 
are  identical,  although  of  course  it  will  always  be  necessary  to 
have  a  certain  margin  of  capacity  over  possible  output,  as  a 
factor  of  safety. 

CONSTANT  REDUCTION  IN  THE  COST  OF  ELECTRICAL  ENERGY 

This  same  rule,  although  to  a  less  extent,  applies  to  the 
operating  and  general  expense  cost;  that  is,  the  cost  other  than 
interest.  To  particularize,  the  manager's  salary  and  other 
administrative  expenses  do  not  increase  in  proportion  to 
maximum  output  of  station;  therefore  the  cost  of  administration 
per  unit  of  output,  if  the  business  is  in  a  healthy  condition, 
must  be  from  year  to  year  reduced.  There  are  a  great  many 
other  expenses  that  are  not  directly  in  proportion  to  output, 
and  these  follow  the  same  rule.  In  a  well-run  plant  the  per- 
centage of  operating  expenses  to  gross  receipts  will  stand  even 
year  after  year,  while  the  income  per  unit  of  output  will  be 
constantly  reduced.  This  gives  excellent  evidence  of  the  fact 
that  the  cost  per  unit  of  output  is  constantly  being  reduced,  as, 
if  it  were  not,  the  percentage  of  expenses  to  gross  receipts  would 
be  increased  in  direct  proportion  to  the  reduction  in  price. 

Moreover,  it  should  be  borne  in  mind  that  there  are  many 
difficulties  in  the  way  of  universal  use  of  electrical  energy  from  a 


CENTRAI^STATION  DEVELOPMENT  31 

central-station  system.  It  is  the  rare  exception  to  find  a  house 
not  piped  for  gas  and  water.  In  the  case  of  the  latter  it  is  al- 
most invariably  the  rule  that  owners  are  compelled  to  pipe  for 
water,  under  the  sanitary  code  of  the  municipality.  On  the 
other  hand,  in  a  large  residential  district,  it  is  the  exception  to 
find  a  house  wired  for  electricity;  consequently  the  output  of 
electrical  energy  per  foot  of  conductor  is  at  the  present  time 
very  low  as  compared  with  the  output  of  gas  per  foot  of  gas 
pipe  in  any  of  the  large  cities.  The  expense  of  wiring  (which 
must  of  necessity  be  borne  by  the  householder)  is  large,  and  it  is 
often  a  barrier  to  the  adoption  of  electric  illumination;  but  as  the 
rule  to  wire  houses  becomes  more  general,  the  output  per  foot 
of  main  will  constantly  increase,  and  therefore  the  interest  per 
unit  of  output  per  foot  of  main  will  constantly  decrease.  This 
same  rule  will  apply  in  the  case  of  expenses  of  taking  care  of  and 
repairing  the  distribution  system,  although  to  a  less  extent. 

If  you  will  take  into  account  these  various  factors  constantly 
operating  toward  a  reduction  of  operating  and  general-expense 
cost  and  interest  cost,  the  conclusion  must  necessarily  be 
forced  upon  you  that  the  price  at  which  electricity  can  be  sold 
at  a  profit  today  is  in  no  sense  a  measure  of  the  income  per 
unit  which  it  will  be  necessary  for  central-station  managers  to 
obtain  in  the  future.  In  1881-82  it  was  difficult  to  make  both 
ends  meet  with  an  income  of  25  cents  per  kilowatt-hour;  today 
there  are  many  stations  showing  a  substantial  return  on  their 
investment  whose  average  income  does  not  exceed  7  cents  per 
kilowatt-hour,  showing  70  per  cent  reduction  in  price  in  less 
than  two  decades.1  How  far  this  constant  reduction  in  cost, 
followed  by  a  constant  reduction  in  selling  price,  will  go,  it  is 
difficult  to  determine;  but  if  so  much  has  been  accomplished 
during  the  first  twenty  years  of  the  existence  of  the  industry, 
is  it  too  much  to  predict  that  in  a  far  less  time  than  the  succeed- 
ing twenty  years  electricity  for  all  purposes  will  be  within  the 
reach  of  the  smallest  householder  and  the  poorest  citizen?2 

1.  The  average  income  of  the  Commonwealth  Edison  Company  in  1914 
was  about  2.05  cents  per  kilowatt-hour. 

2.  This  prediction  has  been  realized,  substantially,  in   1915,  seventeen 
years  after  it  was  made. 


32  ADDRESSES  OF  SAMUEL  INSULL 

GAS  AND  ELECTRICITY  UNDER  CONDITIONS  OF  1898 

If  you  will  trace  the  history  of  the  introduction  of  gas  as 
an  illuminant  you  will  find  that  it  took  a  much  longer  time 
to  establish  it  on  a  commercial  basis  than  it  has  taken  to  estab- 
lish most  firmly  the  electric-lighting  industry.  All  the  great 
improvements  hi  gas — the  introduction  of  water  gas,  the  econo- 
mizing in  consumption  by  the  use  of  the  Welsbach  burner — have 
all  been  made  within  the  time  of  those  before  me.  When  these 
gas  improvements  were  put  into  effect  the  electric-lighting 
business  was  hardly  conceived,  and  certainly  had  not  advanced 
to  a  point  where  one  could  claim  that  it  had  passed  the  ex- 
perimental stage.  Notwithstanding  this,  the  cost  of  electrical 
energy  has  decreased  so  rapidly  that  today  there  are  many 
large  central-station  plants  making  handsome  returns  on  then* 
investments  at  a  far  lower  average  income  per  unit  of  light  than 
the  income  obtained  by  the  gas  company  in  the  same  commun- 
ity. In  making  my  calculations  which  have  led  me  to  this  con- 
clusion, I  have  assumed  that  10,000  watts  are  equal  to  1,000 
feet  of  gas.  This  comparison  holds  good,  providing  an  incandes- 
cent lamp  of  high  economy  is  used  as  against  the  ordinary  gas 
burner.  To  make  a  comparison  between  electric  illumination 
and  incandescent  gas  burners,  such  as  the  Welsbach  burner,  you 
must  figure  on  the  use  of  an  arc  lamp  in  the  electric  circuit  in- 
stead of  an  incandescent  lamp,  which  is  certainly  fair  when  it 
is  remembered  that  incandescent  gas  burners  are,  as  a  rule,  used 
in  places  where  arc  lamps  should  be  used  if  electric  illumina- 
tion is  employed. 

THE  THRESHOLD  OF  A  GREAT  DEVELOPMENT 

With  such  brilliant  results  obtained  in  the  past,  the  prospects 
of  the  central-station  industry  are  certainly  most  dazzling. 
While  the  growth  of  the  business  has  been  phenomenal,  more 
especially  since  1890,  I  think  it  can  be  conservatively  stated 
that  we  have  scarcely  entered  upon  the  threshold  of  the  develop- 
ment which  may  be  expected  in  the  future.  In  very  few  cities 
in  the  United  States  can  you  find  that  electric  illumination 


CENTRAL-STATION  DEVELOPMENT  33 

exceeds  more  than  20  per  cent  of  the  total  artificial  illumination 
for  which  the  citizens  pay.  If  this  be  the  state  of  affairs  in 
connection  with  the  use  of  electricity  for  illuminating  purposes, 
and  if  you  will  bear  in  mind  the  many  other  purposes  to  which 
electricity  can  be  adapted  throughout  a  city  and  supplied  to 
customers  in  small  quantities,  you  may  get  some  faint  concep- 
tion of  the  possible  consumption  of  electrical  energy  in  the 
not-far-distant  future.  Methods  of  producing  it  may  change, 
but  these  methods  can  not  possibly  go  into  use  unless  their 
adoption  is  justified  by  saving  in  the  cost  of  production  —  a 
saving  which  must  be  sufficient  to  show  a  profit  above  the 
interest  and  depreciation  on  the  new  plant  employed.  It  is 
within  the  realms  of  possibility  that  the  present  form  of  generat- 
ing station  may  be  entirely  dispensed  with.  It  has  already  been 
demonstrated  experimentally  that  electrical  energy  may  be 
produced  direct  from  the  coal  itself  without  the  intervention  of 
the  boiler,  engine  and  dynamo-electric  machine.  Whether 
this  can  be  done  commercially  remains  to  be  proved.  What- 
ever changes  may  take  place  in  generating  methods,  I  should, 
were  I  not  engaged  in  a  business  which  affords  so  many  re- 
markable surprises,  be  inclined  to  question  the  possibility  of  any 
further  material  change  in  the  distributing  system.  Improve- 
ments in  the  translating  devices,  such  as  lamps,  may  add 
enormously  to  the  capacity  of  the  distributing  system  per  unit 
of  light;  but  it  does  seem  to  me  that  the  system  itself,  as  origi- 
nally conceived,  is  to  a  large  extent  a  permanency.  Should 
any  great  improvements  take  place  in  the  medium  employed 
for  turning  electrical  energy  into  light,  the  possible  effect  on 
cost,  and  consequently  selling  price,  would  be  enormous. 


STANDARDIZATION,   COST  SYSTEM  OF 
RATES,  AND  PUBLIC  CONTROL1 

CALLING  to  order  the  annual  convention  of  your  asso- 
ciation, my  dual  capacity  causes  me  some  embarrass- 
ment. I  am  in  doubt  whether  as  president  to  enlarge 
upon  the  great  growth  of  this  association  since  its  formation 
in  this  city  on  February  25,  1885,  or  whether  as  a  resident  here 
to  dwell  at  length  upon  the  marvelous  growth  of  the  city  in 
which  we  meet.  Chicago  and  the  industry  with  which  we  are 
identified  have  a  somewhat  close  connection.  The  growth  of 
the  former,  if  measured  from  the  point  of  view  of  the  rapidity 
with  which  history  is  made,  is,  so  to  speak,  the  product  of 
yesterday.  The  electrical  industry,  or  rather  that  portion 
of  it  with  which  we  are  associated,  is  but  little  more  than  the 
product  of  today.  If  the  growth  of  this  city  and  that  of  our 
own  industry  are  as  great  during  the  next  thirteen  years  as  the 
progress  that  they  have  achieved  since  the  date  of  your  first 
meeting  here,  I  am  sure  that  both  the  citizens  of  Chicago  and 
the  members  of  your  association  will  have  every  reason  to  con- 
gratulate themselves.  Speaking  for  those  of  my  friends  con- 
nected with  the  electrical  industry  in  Chicago,  and  also  for 
myself,  I  can  assure  you  that  it  affords  us  very  great  pleasure 
to  welcome  you  at  this  convention,  and  the  fact  of  your  meeting 
in  this  my  home  city  enhances  not  a  little  my  high  appreciation 
of  the  privilege  of  presiding  on  this  occasion. 

1.  Mr.  Insull  was  president  of  the  National  Electric  Light  Association  in 
1897-1898.  This  organization  is  the  great  representative  society  of  the  elec- 
tric-service interests  of  the  United  States.  At  the  convention  held  in  Chicago 
on  June  7,  1898,  President  Insull  delivered  the  address  which  forms  this  chap- 
ter. It  was  a  notable  contribution  to  the  literature  of  the  art  at  that  time,  and 
it  has  lost  little  of  its  savor  with  the  passage  of  the  years.  It  may  be  remarked 
that  this  is  the  first  of  these  papers  in  which  is  enunciated  the  "exclusive"  or 
monopoly  doctrine  which  was  later  advocated  so  earnestly  by  Mr.  Insull.  This 
address  was  prepared  in  advance  and  read  from  manuscript. 

34 


PUBLIC  CONTROL  ADVOCATED       35 

The  officers  of  your  association  have  had  in  mind,  in  pre- 
paring a  programme  for  this  convention,  the  importance  of 
bringing  before  you  subjects  of  interest  in  connection  with 
central-station  management;  and  the  papers  to  be  read  at  our 
various  sessions  and  the  topics  mentioned  for  discussion  cover 
such  a  wide  range  that  it  would  seem  undesirable  for  me  to 
occupy  much  of  your  time  by  way  of  introduction.  The  various 
gentlemen  who  have  so  kindly  consented  to  read  papers  will 
deal  with  such  important  questions  as  the  cost  of  generating 
and  distributing  the  product  which  we  manufacture,  trans- 
former economy,  and  the  rival  claims  of  alternating  currents 
and  direct  currents  as  means  of  distribution.  The  many  prob- 
lems which  you  have  to  solve  in  connection  with  the  question 
of  public  lighting,  and  the  cost  of  producing  electrical  energy 
by  water  power,  will  also  be  discussed. 

STANDARD  VERSUS  SPECIAL  MACHINERY 

A  matter  that  has  called  forth  during  the  last  year  con- 
siderable discussion  is  the  question  of  the  use  of  standard 
apparatus  and  the  tendency  towards  the  specification  of  special 
machinery  on  the  part  of  electrical  engineers.  This  course 
is  not  by  any  means  confined  to  large  work,  but  is  followed  by 
some  engineers  whether  they  are  designing  a  small  isolated  plant 
or  are  projecting  a  large,  modern  central  station.  It  would  seem 
to  me  to  be  of  paramount  importance  to  the  manufacturer  and 
user  that  both  should  co-operate  in  eliminating,  as  far  as 
possible,  from  the  business  the  necessity  of  building  and  using 
special  types  of  machinery.  This  can  only  be  done  by  the 
adoption  of  standard  specifications  for  various  standard  types 
of  apparatus.  A  committee  of  the  American  Institute  of 
Electrical  Engineers  has  already  taken  this  subject  under 
consideration,  and  I  believe  that  we  shall  be  serving  alike  the 
interests  of  the  manufacturers  and  users  of  electrical  apparatus 
if  we  take  some  action  with  a  view  to  co-operating  with  the 
Institute  and  other  bodies  in  this  matter.  In  drawing  atten- 
tion to  this  subject,  I  speak  with  an  appreciation  of  the  positions 
of  both  manufacturer  and  user,  having  had  more  or  less  con- 


36  ADDRESSES  OF  SAMUEL  INSULL 

nection  with  the  manufacture  of  electrical  apparatus  and  the 
manufacture  of  electrical  energy. 

Constant  duplication  of  parts,  resulting  in  constant  duplica- 
tion of  a  given  piece  of  machinery,  means,  as  any  manufacturer 
will  tell  you,  constant  reduction  in  cost.  Variation  from  a 
given  type  means  increased  cost  and  even  the  wiping  out  of  an 
apparent  profit.  In  the  last  year  or  so  there  has  been  a  great 
deal  of  discussion  in  England  prompted  by  the  success  of  Ameri- 
can manufacturers  in  obtaining  large  contracts  for  electric- 
traction  work  in  Great  Britain,  and  the  inquiry  has  often  been 
made,  How  is  it  possible  for  American  electrical  manufacturers, 
with  high  wages  against  them,  to  compete  with  English  builders, 
whose  scale  of  pay  to  their  workmen  is  on  a  very  much  lower 
basis?  If  you  will  examine  into  the  amount  of  electric- traction 
machinery  manufactured  in  this  country  under  a  system  of 
constant  duplication  and  the  use  of  special  tools,  and  then 
visit  the  electrical  establishments  on  the  other  side  of  the 
water,  and  note  the  tendency  there  towards  specializing  each 
particular  job,  you  will  soon  recognize  the  reason  for  the  lower 
cost  here.  In  America  this  class  of  work  is  largely  designed 
by  the  manufacturer,  and,  as  a  natural  result,  is  the  dupli- 
cate of  something  already  produced;  while  on  the  other  side 
of  the  Atlantic  the  builder  of  the  machinery  works  from  the 
plans  of  the  electrical  engineer,  which  necessitates  his  producing 
something  different  to  fill  each  different  contract.  In  one 
case,  the  machinery  is  really  manufactured;  in  the  other  case, 
the  builder  runs  a  jobbing  shop. 

Unfortunately,  during  the  last  few  years  American  users 
of  electrical  apparatus  have  departed  somewhat  from  the 
pursuance  of  what  is  really  a  fundamental  principle  of  Ameri- 
can manufacture,  namely,  the  use  of  existing  types,  which  are 
turned  out  in  large  quantities  with  special  tools,  with  a  view  to 
the  lowest  possible  cost  of  production.  The  electrical  engineer 
for  the  purchaser  has  been  permitted  to  draw  up  specifications 
that  have  tended  toward  the  specializing  of  apparatus,  neces- 
sarily interfering  with  rapid  manufacture  and  low  cost  of  the 
product.  The  disadvantage  to  the  manufacturer  is  apparent. 


PUBLIC  CONTROL  ADVOCATED       37 

It  is  turning  our  large  electrical  works  from  manufacturing 
establishments  into  jobbing  shops,  cutting  down  their  produc- 
tiveness, increasing  their  labor  cost  and  lengthening  the  time 
that  it  takes  to  produce  a  given  article.  Looking  at  it,  there- 
fore, from  the  point  of  view  of  the  manufacturer,  the  pro- 
ducing power  of  his  plant  is  reduced,  and  consequently  his 
interest  and  general-expense  cost  is  higher;  his  labor  cost  is 
increased;  and  if  he  finds  himself  unable  to  increase  his  selling 
price,  his  shop  must  be  run  at  a  loss  instead  of  at  a  profit. 

The  user  is  necessarily  interested  in  low  cost  of  production 
on  the  part  of  the  manufacturer,  as  he  cannot  expect  to  pur- 
chase apparatus  except  at  prices  that  yield  a  return  to  the 
maker.  From  this  point  of  view  alone  it  would  seem  to  me  to 
the  interest  of  the  user  that  he  should  co-operate  with  the  manu- 
facturer with  a  view  to  standardizing  apparatus,  eliminating 
unnecessary  variations  from  a  given  type  and  providing  specifi- 
cations for  machinery  calling  for  a  given  capacity  at  a  given 
efficiency.  Such  a  course  would  lead  to  low  cost  of  manufac- 
ture, and  consequently  low  selling  price,  coupled  with  rapid 
production. 

WHY  STANDARDIZED  APPARATUS  SHOULD  BE  FAVORED 

Another  objection  to  special  apparatus  is  the  expense  and 
delay  in  obtaining  duplicate  parts  in  case  of  breakdown.  The 
fear  of  delay  under  such  circumstances  often  necessitates  the 
user's  carrying  the  duplication  of  his  plant  to  a  point  entirely 
unnecessary  when  standard  apparatus  is  used.  Capital  in- 
vestment, and  consequently  interest  cost,  is  thus  increased,  not 
only  by  the  purchase  of  apparatus  that  of  itself  is  expensive 
to  build,  but  also  by  the  duplication  of  investment  which  must 
of  necessity  follow. 

A  further  point  that  should  be  borne  in  mind  in  connection 
with  the  lack  of  standard  specifications  is  the  opportunity 
that  it  gives  to  the  unprincipled  manufacturer  to  dispose  of 
his  second-rate  apparatus  to  the  uninitiated.  We  talk  of  a 
machine  having  a  given  "capacity"  or  rating;  but  under  what 
conditions  should  it  operate  to  develop  this  rating,  and  how 


38  ADDRESSES  OF  SAMUEL  INSULL 

often  does  it  occur  that  a  dynamo-electric  machine  is  rated 
entirely  too  high  and  at  the  cost  of  its  efficiency?  How  much 
miscellaneous  material  used  in  connection  with  the  industry  is 
absolutely  unfitted  for  the  purpose  for  which  it  is  sold?  Surely, 
all  of  us,  manufacturers  and  users,  are  interested  in  maintain- 
ing the  highest  possible  standard  of  work  and  eliminating  alike 
from  our  central-station  systems  and  the  installations  for  our 
customers  worthless  appliances  whose  only  recommendation 
is  their  apparent  cheapness,  whereas,  as  a  matter  of  fact,  they 
are  really  the  most  expensive  that  can  be  bought,  because  they 
are  unfitted  for  the  purposes  for  which  they  are  intended. 

A  proper  consideration  of  this  subject  would  not  embrace 
alone  the  apparatus  we  are  ourselves  in  the  habit  of  buying 
for  use  in  connection  with  our  plants,  but  also  the  appliances 
used  in  connection  with  customers'  house  wiring.  It  should 
be  borne  in  mind  that  faulty  apparatus,  from  one  cause  or 
another  resulting  in  a  stoppage  of  the  service  of  one  or  more 
customers,  is,  in  the  mind  of  the  user  of  electricity,  set  down  to 
the  unreliability  of  the  system  as  a  whole.  A  central-station 
customer  seldom  discriminates  between  a  contractor  who 
supplies  a  worthless  device  and  a  company  supplying  him  with 
energy.  Standard  specifications  should  therefore  cover,  not 
alone  the  machinery  used,  but  also  the  devices  and  material 
forming  part  of  a  customer's  installation.  This  association 
has  addressed  itself  at  various  times  to  the  consideration  of 
questions  in  connection  with  house  wiring,  and  has  co-operated 
with  the  National  Board  of  Fire  Underwriters  and  other 
bodies  with  a  view  to  establishing  rules  to  be  followed  by 
contractors.  I  strongly  recommend  that  this  matter  be  taken 
up  on  a  broader  basis  than  heretofore,  and  that  in  conjunction 
with  the  technical  societies  we  invite  the  co-operation  of  the 
electrical  manufacturers,  with  a  view  to  standardizing  apparatus 
and  the  specifications  therefor,  whether  for  use  in  the  central 
station  itself  or  in  connection  with  the  distributing  system.1 

1.  In  view  of  the  co-operative  deliberations  of  the  electrical  and  insurance 
interests  of  the  United  States  in  relation  to  less  expensive  house  wiring  (possi- 
bly by  the  use  of  concentric  wiring)  and  other  subjects,  in  progress  as  this 
book  is  put  to  press  early  in  1915,  these  utterances  of  seventeen  years  ago  are 
particularly  significant  and  interesting. 


PUBLIC  CONTROL  ADVOCATED       39 

I  do  not  want  my  remarks  on  this  subject  to  be  taken  as  in 
any  way  censuring  the  many  electrical  engineers  who  have  by 
then*  special  training  and  natural  ability  done  so  much  to 
develop  the  industry  with  which  we  are  connected.  From  my 
experience  I  am  satisfied,  however,  that,  from  the  point  of 
view  of  the  user,  the  designing  engineer  who  adapts  his  require- 
ments to  the  standard  apparatus  of  a  first-class  manufacturer 
is  able  to  produce  a  plant  of  more  satisfactory  character,  and 
more  economical  to  operate,  than  that  designed  by  those  en- 
gineers who  are  influenced  by  the  desire  to  use  machinery  that 
they  can  point  to  as  of  their  own  design. 

LAMP  SPECIFICATIONS 

The  consideration  of  the  subject  of  standard  specifications 
would  naturally  include  the  preparation  of  specifications  with 
relation  to  the  manufacture  of  incandescent  lamps.  For 
several  years  past  a  committee  of  this  association  has  had  this 
subject  under  consideration.  It  has  been  found  practicable 
by  a  number  of  large  central-station  companies,  connected 
with  another  association1  and  buying  from  one  manufacturer, 
to  purchase  their  lamps  under  specifications  that  provide  for 
the  testing  of  samples  of  the  product  of  the  factory,  the  payment 
for  lamps  supplied  being  based  on  the  results  of  the  tests.  It 
seems  to  me  that  it  would  be  possible  to  adopt  standard  specifi- 
cations under  which  our  members  could  purchase  their  lamps 
from  any  reputable  lamp  manufacturer.  The  importance  of 
this  matter  will  be  appreciated  when  it  is  remembered  that  the 
cost  of  lamp  renewals  per  unit  of  output  exceeds  $1  per  ton  of 
the  cost  of  fuel  in  operating  a  central  station  with  the  most 
modern  steam  plant. 

SELLING  PRICE  BASED  ON  COST 

It  is  of  prime  importance  to  central-station  managers  that 
they  should  sell  their  product,  electricity,  to  the  greatest  num- 

1.  No  doubt  the  Association  of  Edison  Illuminating  Companies  and  the 
General  Electric  Company  are  referred  to  here. 


40  ADDRESSES  OF  SAMUEL  INSULL 

her  of  consumers  at  the  lowest  possible  price,  and  yet  obtain  a 
reasonable  profit.  For  a  number  of  years  the  basis  of  charge 
on  the  part  of  most  companies  has  been  a  given  unit  price,  with 
discounts  for  quantity.  In  the  early  days  of  the  business  some 
companies  were  in  the  habit  of  charging  a  fixed  price  per  lamp 
per  month,  having  no  control  whatever  over  the  use  of  the 
product,  but  being  necessarily  responsible  for  the  increased 
operating  expenses  caused  by  the  wastefulness  of  customers, 
who  could  hardly  be  expected  to  economize,  inasmuch  as  they 
paid  exactly  the  same  price  for  the  use  of  light  whether  they 
burned  it  one  or  twenty-four  hours  a  day.  A  majority  of  the 
companies  following  this  method  realized  at  an  early  date  the 
absurdity  of  distributing  that  for  which  they  were  not  paid,  and 
as  a  result  I  presume  we  can  fairly  assume  that  the  electric- 
lighting  business  (with  the  exception  of  arc-light  service)  is  run 
almost  universally  on  a  meter  basis. 

If  you  will  make  a  careful  examination  of  the  factors  enter- 
ing into  the  cost  of  manufactured  electricity,  you  will  realize 
that  interest  is  by  far  the  most  important  element,  and  that 
this  item  varies  very  considerably  with  the  different  classes 
of  service  furnished  by  a  central-station  company.  The 
interest  factor  in  cost  depends  upon  the  yearly  average  con- 
sumption of  your  product  by  the  customer;  or,  to  put  it  another 
way,  you  can  figure  your  interest  on  the  basis  of  so  much  per 
unit  of  output  at  maximum  load. 

For  instance,  take  the  two  probably  extreme  classes  of 
customers  to  whom  the  central-station  company  supplies 
electricity  for  lighting  purposes.  On  the  one  hand,  you  have 
an  office  building  whose  tenants  use  artificial  illumination  for 
only  a  short  space  of  time  each  day  and  only  during  the  winter. 
On  the  other  hand  you  have  a  basement  customer  whose  use 
of  your  product  averages  nearly  one-half  of  the  day  of  twenty- 
four  hours  during  the  whole  year.  Your  investment  to  take 
care  of  each  of  these  customers  is  practically  the  same;  there- 
fore your  total  interest  cost  must  be  the  same  in  both  cases; 
but  if  you  distribute  this  interest  cost  over  the  actual  units 
consumed,  you  will  find  that  the  tenant  of  the  office  building 


PUBLIC  CONTROL  ADVOCATED       41 

costs  you  for  interest  per  unit  of  energy  sold  many  times  more 
than  does  the  occupant  of  the  basement.  There  are  of  necessity 
as  many  different  grades  of  customers  between  the  two  ex- 
tremes I  have  mentioned  as  there  are  different  classes  of 
business  and  different  characters  of  structures  in  which  these 
businesses  are  conducted.  Surely,  if  the  cost  of  production 
varies  according  to  the  different  conditions  under  which  your 
customers  use  your  product,  it  is  but  fair  that  the  selling  price 
per  unit  should  vary  correspondingly.  If  it  does  not,  you,  of 
necessity,  encourage  the  use  of  electricity  by  customers  whose 
business  is  unprofitable  to  you,  and  discourage  the  use  of  your 
product  by  customers  whose  business  at  a  lower  price  would 
yield  you  a  fair  return. 

In  past  conventions  the  question  of  how  to  improve  the 
day  load  for  the  purpose  of  raising  the  average  output,  what 
classes  of  business  other  than  lighting  should  be  encouraged 
to  achieve  this  result,  and  the  price  at  which  we  can  afford  to 
sell  current  to  the  operators  of  these  different  lines  of  business, 
have  come  up  for  discussion.  At  the  last  convention  the  real- 
ization of  the  fact  that  great  differences  exist  in  the  elements 
governing  the  cost  of  product  for  different  classes  of  lighting 
customers  was  ably  presented  by  Mr.  Wright,  and  he  pointed 
out  that  the  improvement  of  your  load  factor,  the  broadening 
of  your  curve,  and  the  rendering  less  acute  of  your  peak,  are 
matters  within  your  own  adjustment,  provided  that  you  will 
realize,  in  considering  cost  with  a  view  to  making  a  selling  price, 
that  conditions  are  so  dissimilar  that  the  expense  to  you  per 
unit  of  supplying  two  customers  in  the  same  block  is  likely  to  be 
widely  different. 

Various  plans  have  been  adopted  by  a  comparatively  small 
number  of  companies  to  meet  the  conditions  as  we  now  know 
them  to  exist.  Some  companies  have  adopted  the  scheme  of 
allowing  certain  special  discounts  provided  the  income  per 
month  per  lamp  connected  exceeds  a  certain  amount.  Other 
companies  charge  one  rate  for  energy  used  during  certain  speci- 
fied hours  of  the  day  and  a  much  lower  rate  for  that  used  during 
the  remaining  hours  of  the  day.  A  third  method  is  a  system 


42  ADDRESSES  OF  SAMUEL  INSTILL 

of  discounts  based  upon  the  total  consumption  of  energy  during 
a  given  period,  considered  in  connection  with  the  maximum 
consumption  at  any  time  during  the  same  period. 

These  various  methods  all  have  the  same  object  in  view — 
the  meeting  of  the  conditions  of  each  individual  customer,  and 
yet  at  the  same  time  earning  a  fair  return  on  all  of  the  invest- 
ment provided  for  all  of  your  customers. 

In  discussing  this  matter  I  have  referred  to  interest  cost 
alone,  because  it  forms  so  large  a  proportion  of  the  total  cost; 
but  you  will  find  that  this  same  principle  enters  into  a  number  of 
the  other  elements  that  go  to  make  up  your  total  cost.  It  would 
therefore  appear  to  me  that  in  considering  the  cost  of  generating 
electricity  you  should  bear  in  mind  that  a  large  proportion  of 
the  items  that  go  to  make  up  the  total  are  within  your  own 
control,  and  their  amount  per  unit  of  output  depends  very 
largely  upon  the  methods  adopted  in  selling  your  product. 

PUBLIC  CONTROL  AND  PRIVATE  OPERATION 

A  subject  of  growing  importance  to  a  number  of  our  mem- 
bers is  the  question  of  the  public  ownership  and  operation  of 
the  undertakings  now  operated  by  electric-lighting  companies. 
The  agitation  in  connection  with  this  subject  has  called  forth 
a  great  deal  of  discussion,  partly  by  those  interested  in  it  simply 
with  a  view  to  extending  the  influence  of  political  parties,  and 
partly  by  serious  disinterested  thinkers  who  believe  that  the 
best  interests  of  the  greatest  number  are  to  be  obtained  by  the 
creation  of  a  municipal  socialism,  which,  if  carried  to  its  logical 
conclusion,  must  ultimately  result  in  municipalities  perform- 
ing, with  others,  such  public-service  work  as  we  are  engaged  in, 
and  also  in  producing  the  food  we  eat  and  the  clothes  we  wear. 

To  those  occupied  in  the  management  of  electric-lighting 
properties  it  does  not  seem  possible  that  the  movement  in  favor 
of  municipal  operation  of  electric-lighting  plants,  based  upon 
the  assumption  that  a  municipality  can  produce  electricity 
cheaper  than,  or  even  as  cheap  as,  a  private  corporation,  is 
well  founded  We  all  realize,  from  the  close  attention  we  have 


PUBLIC  CONTROL  ADVOCATED       43 

to  give  to  our  own  affairs,  that  self-interest  and  the  necessity 
of  getting  a  return  on  our  investment  are  the  first  essentials 
to  the  economical  administration  of  large  enterprises.  While 
I  do  not  pretend  to  assert  that  electric-lighting  companies  are 
beyond  reproach,  I  wish  to  point  out  that  many  of  the  evils 
complained  of  as  pertaining  to  corporate  management  are  the 
direct  results  of  the  enforcement  of  unwise  conditions  through 
legislative  action.  Ill-advised  efforts  are  made  often  by  legisla- 
tive bodies  to  secure  advantages  in  the  direction  of  control 
which  cannot  be  obtained  without  giving  an  equivalent  in 
protection  to  the  industry.  This  causes  the  investor  to  feel 
that  his  property  is  being  attacked,  and  compels  him  to  resist 
such  legislation.  The  result  is  a  feverish  agitation,  crimination 
and  recrimination  between  the  would-be  improvers  of  municipal 
government  and  the  owners  of  corporate  properties  without 
reaching  a  conclusion  satisfactory  to  either. 

The  fallacy  of  the  so-called  reformer's  theory  results  from 
looking  only  at  what  he  calls  the  injurious  effects  of  corporate 
management  without  taking  into  account  its  indisputable 
benefits.  He  does  not  seek  for  the  cause  of  the  trouble.  If 
reformers  will  take  accurate  account  of  all  the  points  in  the 
problem,  they  will  discover  that  the  evils  complained  of  re- 
sult from  errors  in  legislation  designed  to  determine  the  rela- 
tions between  municipal  bodies  and  electric-lighting  companies. 
It  seems  to  me  that  the  claim  that  municipal  operation  is  the 
universal  cure  for  all  diseases  for  which  electric-lighting  com- 
panies are  supposed  to  be  responsible  merely  proposes  the  sub- 
stitution of  political  in  the  place  of  industrial  management. 
This  raises  the  question,  Is  the  administration  of  municipal 
affairs  in  the  various  cities  throughout  this  country  so  econom- 
ical, as  compared  with  the  management  of  private  industries, 
and  the  class  of  service  rendered  so  efficient,  as  to  justify  the 
increasing  of  the  burdens  already  imposed  upon  municipal 
government?  It  appears  to  me  that  a  correct  division  of 
power  and  responsibility  requires  political  government  merely 
to  control  private  industrial  management.  Where  political 
government  and  industrial  management  are  merged  into  one 


44  ADDRESSES  OF  SAMUEL  INSULL 

interest,  the  power  of  control  is  seriously  impaired,  since  a 
political  administration  cannot  be  reformed  without  overturn- 
ing the  party  in  power. 

I  cannot  bring  myself  to  the  belief  that  the  citizens  of  this 
country  are  in  fact  opposed  to  large  aggregations  of  capital  in 
corporate  form,  as  such  aggregations  are  absolutely  necessary 
to  the  operation  of  all  great  undertakings  by  private  enter- 
prise. It  is  as  impossible  to  operate  such  vast  affairs  with  in- 
dividual capital,  as  a  personally  owned  business,  as  it  is  for  us 
to  live  without  municipal,  state  and  national  governments. 
The  misunderstandings  that  from  time  to  time  occur  between 
communities  and  the  managers  of  electric-lighting  companies 
will,  to  my  mind,  disappear  entirely  if  the  relations  between 
the  two  are  correctly  founded  on  the  basis  of  public  control, 
with  corresponding  protection  to  the  corporations  operating 
this  industry.  It  would  seem  to  me  to  be  a  very  proper  function 
for  this  association  to  address  itself  to  educating  the  public 
to  a  definite  legislative  policy  that  will  be  fair  to  the  municipal- 
ities, securing  to  the  public  the  best  service  at  the  lowest  pos- 
sible price,  and  protecting  corporations  by  giving  them  fran- 
chises which,  while  conserving  municipal  control,  will  insure 
to  the  investor  the  permanency  of  the  undertaking. 

COMPETITION  is  NOT  THE  TRUE  REGULATIVE  FORCE 

It  is  supposed  by  many  who  discuss  municipal  affairs  that 
the  granting  of  competitive  franchises  for  public-service  work 
is  the  true  means  of  obtaining  for  users  the  lowest  possible 
price  for  the  service  rendered,  where,  as  a  matter  of  fact,  the 
exact  opposite  is  the  ultimate  result.  This  is  proved  by  results 
in  all  large  cities  where  the  most  severe  competition  has  taken 
place.  Acute  competition  necessarily  frightens  the  investor, 
and  compels  corporations  to  pay  a  very  high  price  for  capital. 
The  competing  companies  invariably  come  together,  and  the 
interest  cost  on  their  product  (which  is  by  far  the  most  impor- 
tant part  of  their  cost)  is  rendered  abnormally  high,  owing 
partly  to  duplication  of  investment  and  partly  to  the  high  price 


PUBLIC  CONTROL  ADVOCATED       45 

paid  for  money  borrowed  during  the  period  of  competition. 
The  selling  price  of  a  service  should  be  based  on  its  cost,  and  in 
any  business  such  as  public  work,  where  the  investment  is  large 
and  the  annual  turnover  is  comparatively  small,  if  the  item  of 
interest  be  necessarily  augmented,  it  must  be  reflected  in  the 
price  paid  by  public  and  private  users. 

While  it  is  not  supposed  to  be  popular  to  speak  of  exclusive 
franchises,  it  should  be  recognized  that  the  best  service  at  the 
lowest  possible  price  can  only  be  obtained,  certainly  in  con- 
nection with  the  industry  with  which  we  are  identified,  by 
exclusive  control  of  a  given  territory  being  placed  in  the  hands 
of  one  undertaking.  In  most  European  countries  public-ser- 
vice operations  enjoy  exclusive  franchises,  under  proper  con- 
trol, and  are  able  to  obtain  capital  for  their  undertakings  at 
the  lowest  commercial  rates,  thus  materially  affecting  the  cost 
of  their  product,  of  which  interest,  as  I  have  already  stated,  is 
necessarily  so  great  a  part.  In  order  to  protect  the  public, 
exclusive  franchises  should  be  coupled  with  the  conditions 
of  public  control,  requiring  all  charges  for  services  fixed  by 
public  bodies  to  be  based  on  cost  plus  a  reasonable  profit.  It 
will  be  found  that  this  cost  will  be  reduced  in  direct  proportion 
to  the  protection  afforded  the  industry.  The  more  certain  this 
protection  is  made,  the  lower  the  rate  of  interest  and  the  lower 
the  total  cost  of  operation  will  be,  and,  consequently,  the  lower 
the  price  of  the  service  to  public  and  private  users.  If  the 
conditions  of  our  particular  branch  of  public  service  are  studied 
in  places  where  there  is  a  definite  control,  whether  by  com- 
mission or  otherwise,  it  will  be  found  that  the  industry  is  in  an 
extremely  healthy  condition,  and  that  users  and  taxpayers 
are  correspondingly  well  served. 

COMPENSATION  FOR  FRANCHISES 

When  prices  for  services  are  based  on  cost,  it  matters  not 
whether  or  not,  in  the  establishment  of  a  system  of  legislative 
control,  provision  is  made  for  paying  a  portion  of  the  receipts 
direct  to  the  municipality.  If  the  public  demands  a  percentage, 


46  ADDRESSES  OF  SAMUEL  INSULL 

surely  we  can  afford  to  pay  it,  as  it  would  simply  be  added  as 
an  item  of  expense,  on  which  our  selling  price  would  be  figured. 
If  the  public  does  not  demand  a  percentage,  this  selling  price 
would  be  proportionately  less.  It  is  simply  a  question  as  to 
whether  our  municipal  bodies  prefer  to  raise  a  portion  of  their 
income  by  taxing  their  citizens  through  the  agency  of  public- 
service  corporations,  or  whether  they  prefer  to  raise  that  por- 
tion of  their  income  by  collecting  it  direct  from  citizens  them- 
selves. Revenue  raised  by  a  percentage  on  gross  receipts  of 
the  electric-lighting  business  would,  at  the  present  time,  how- 
ever, seem  to  be  somewhat  unfairly  obtained  in  cases  where  the 
selling  price  is  subject  to  legislative  control  and  based  on  cost  of 
service,  as  the  result  would  be  that  a  small  minority  of  citizens 
using  electricity  would  be  forced  to  contribute  largely  to  the 
public  revenue,  whereas  the  benefits  enjoyed  therefrom  would 
be  to  the  advantage  of  the  whole  community. 

TAKING  PRIVATE  PROPERTY  FOR  PUBLIC  USE 

Another  point  that  should  be  included  in  a  proper  scheme  of 
public  control  is  a  condition  under  which  the  municipality  would 
have  the  right  to  purchase  the  undertaking.  Such  a  right 
should  include  a  direct  obligation  on  the  part  of  the  municipality 
to  purchase  the  property  at  a  fair  price  whenever  it  is  thought 
desirable  that  the  industry  should  be  operated  by  the  municipal- 
ity. The  possibility  of  the  exercise  of  the  right  of  purchase  by 
the  municipality  would  of  itself  make  it  to  the  interest  of  the 
owners  of  the  property  to  do  their  full  duty  in  their  relations 
to  the  public.  On  the  other  hand,  if  a  community  licenses  a 
corporation  to  perform  a  certain  public  service,  and  if  that  cor- 
poration invests  money  and  develops  its  business,  surely  it  is 
unfair  for  that  community  to  go  into  the  same  line  of  public- 
service  work  itself  without  first  purchasing  the  existing  plant. 
If  this  is  not  done,  the  value  of  private  property  will  be  de- 
stroyed, without  just  compensation  being  made  therefor,  in  an 
attempt  to  secure  a  public  benefit.  I  do  not  believe  that  the 
people  as  a  whole  are  so  unfair  as  to  demand  that  such  a 
course  shall  be  taken. 


PUBLIC  CONTROL  ADVOCATED       47 

My  recommendations  on  the  subject,  which  I  have  just 
presented,  are  by  no  means  original.  Most  public-service  cor- 
porations in  Great  Britain  are  run  on  practically  the  bases 
indicated,  and  in  more  than  one  state  in  the  Union  corporate 
legislation  has  taken  the  same  direction. 

I  would  summarize  in  just  two  sentences  the  position  that  I 
think  w,e  should  take  on  this  subject: 

First. —  Franchises  granted  to  public-service  corporations 
should  secure  them  the  same  degree  of  protection  in  their  rights 
to  their  property  as  is  enjoyed  by  other  investments. 

Second. —  Public  control  of  charge  for  service,  based  on 
cost  plus  a  reasonable  profit,  and  eliminating  the  factor  of 
competition,  is  the  proper  safeguard  for  the  interests  of  users, 
taxpayers  and  investors. 


POSSIBILITIES  OF  THE  CENTRAL-STATION 
BUSINESS1 

THE  FIRST  central-station  installation  which  I  ever  saw 
was  the  first  one  that  was  ever  built.  It  was  installed 
at  Menlo  Park,  N.  J.,  by  Thomas  A.  Edison  hi  the  winter 
of  1880-81  for  the  purpose  of  demonstrating  the  success  of  what 
was  popularly  called  the  subdivision  of  the  electric  light. 

The  generating  station  was  composed  of  nine  or  ten  60-light 
dynamos  and  was  situated  in  a  building  beside  Mr.  Edison's 
brick  machine  shop  at  his  laboratory.  His  workshops  and 
laboratory  and  his  own  residence  and  those  of  his  assistants 
were  lighted  by  incandescent  lamps.  The  system  employed  was 
the  two- wire  multiple-arc  system  of  mains  and  feeders,  and 
the  distribution  system  was  underground.  There  were  motors 
at  work  in  Mr.  Edison's  laboratory,  and,  in  fact,  all  of  the  essen- 
tial features  of  central-station  generation  and  distribution  were 
shown. 

It  was  on  the  evening  of  the  2d  of  March,  188 1,2  that  I  paid 
my  first  visit  to  Menlo  Park.  I  had  arrived  in  New  York  from 
England  the  day  before,  having  come  on  the  invitation  of 
Mr.  Edison  to  act  as  his  private  secretary.  We  had  heard  all 
kinds  of  gossip  in  London  about  the  wonderful  things  that  were 
being  done  at  Menlo  Park  in  the  way  of  practical  electric-light- 
ing work.  Mr.  Edison  had  been  writing  to  his  English  friends 

1.  Although  often  solicited,  Mr.  Insull  has  made  it  an  almost  invariable 
rule  not  to  write  articles  for  the  periodical  press.     Yielding  to  the  importunities 
of  a  friend,  he  did,  however,  prepare  "Some  Recollections  of  Central-Station 
Development"  for  the  Twentieth  Anniversary  Number  of  the  Western  Elec- 
trician.    This  article  was  published  on  September  28,  1907,  and  extracts  from 
it  are  given  here.     At  that  time,  as  will  be  seen,  Mr.  Insull  had  formulated 
pretty  clearly  his  conception  of  the  central  station  as  the  wholesale  source  of 
electricity  supply  for  all  the  needs  of  its  community. 

2.  For  correction  in  this  date  see  note  on  page  xxvi. 

48 


WHOLESALING  OF  ELECTRICITY  49 

for  two  years  prior  to  the  date  of  my  arrival  in  New  York  telling 
of  his  success,  but  as  we  had  had  no  demonstration  of  it  on  the 
other  side  of  the  water  and  as  scientists  on  both  sides  of  the 
Atlantic  expressed  their  doubts  as  to  the  results  of  Mr.  Edison's 
experimental  work,  my  natural  desire  when  I  arrived  here  was 
to  pay  an  immediate  visit  to  Menlo  Park  and  cable  my  English 
friends  that  I  had  actually  seen  Mr.  Edison's  central-station 
system  at  work. 

So  far  as  the  service  rendered,  this  first  experimental  plant 
at  the  birthplace  of  the  central-station  industry  was  as  perfect 
as  the  service  now  given  by  any  of  the  central-station  companies 
in  our  large  cities.  And  although,  instead  of  using  in  the  gen- 
erating station  steam  turbo-generators  of  a  capacity  from  10,000 
to  15,000  kilowatts,1  small  bipolar  machines  of  from  six  to  ten 
kilowatts  capacity  were  used,  yet  the  mam  essentials  of  central- 
station  engineering,  as  practiced  today,  were  shown  in  this 
original  and  successful  effort  at  central-station  building.  There 
was  the  multiple-arc,  distribution  system  with  feeders  running 
from  the  generating  station  to  various  points  in  the  system  of 
mains  in  order  to  equalize  the  pressure,  incandescent  lamps  and 
motors  running  in  multiple,  and  the  street  wiring  system  thor- 
oughly insulated  and  laid  underground;  in  fact,  all  the  essentials 
of  modern  central-station  distribution. 

DIVERSIFIED  DUTIES  OF  MR.  EDISON  AND  His  ASSISTANTS 

At  the  same  time  and  running  from  the  same  generation 
station  Mr.  Edison  had  in  operation  about  a  mile  of  electric 
railway,  the  track  being  partially  insulated  and  used  for  con- 
ducting the  current.  A  speed  of  42  miles  an  hour  was  attained, 
and  over  5,000  people  rode  on  this  experimental  electric  railway. 

I  can  well  remember  the  early  experiences  in  central-station 
construction  in  New  York  in  the  winter  of  1881  and  the  summer 
of  1882.  The  men  familiar  with  the  work  could  at  that  time 
be  counted  on  the  fingers  of  one  hand.  There  were  Mr.  Edison 
and  three  or  four  assistants. 

1.  Eight  years  later,  in  1915,  this  would  have  been  written  25,000  to 
35,000  kilowatts. 


50  ADDRESSES  OF  SAMUEL  INSULL 

After  Mr.  Edison  got  through  with  his  experimental  work 
at  Menlo  Park,  he  and  his  assistants  had  to  pick  out  the  terri- 
tory in  New  York  for  central-station  distribution,  decide  on 
the  generating  capacity  necessary  and  the  size  of  conductors 
required.  Then,  after  the  general  specifications  for  the  work 
had  been  prepared,  it  was  necessary  that  there  should  be  pro- 
vided factories  in  which  to  build  the  generating  machinery  and 
underground  conductors  needed;  also  supplies,  such  as  lamps, 
sockets,  switches,  meters,  etc.  All  these  establishments  had 
to  be  started  and  organized  and  the  machinery  produced  and 
put  in  place  and  the  necessary  central-station  operating  force 
taught  to  operate  and  take  care  of  the  central-station  system. 

This  work  —  all  of  it  —  had  to  be  done  by  a  few  men  whose 
only  experience  was  that  gained  in  demonstrating  experiment- 
ally at  Menlo  Park  Mr.  Edison's  inventions  and  ideas  for 
central-station  work. 

During  the  building  of  the  New  York  central-station  system 
I  was  mainly  engaged  in  the  daytime  in  looking  after  Mr. 
Edison's  business  affairs.  The  laying  of  underground  conduc- 
tors used  to  take  place  at  night,  and  the  work  of  laying  was 
superintended  by  Mr.  Edison  and  Mr.  John  Kruesi,  the  latter 
being  occupied  in  the  day  in  manufacturing  the  conductors,  or, 
as  they  were  then  known,  "Kruesi  tubes."  I  was  in  the  habit 
of  assisting  them  at  night,  my  main  duty  being  to  sit  on  a  street 
corner  and  watch  a  galvanometer  used  in  testing  the  tubes  for 
insulation. 

ALTERNATING-CURRENT  AND  THREE- WIRE  DEVELOPMENT 

While  the  direct-currect  business  was  being  exploited  by  the 
Edison  companies,  the  Westinghouse  Electric  Company  and 
the  Thomson-Houston  Electric  Company  were  engaged  in 
pushing  the  alternating-current  business  and  using  as  a  basis 
for  it  the  old  arc-light  companies  which  in  a  number  of  cities 
had  been  formed  mainly  by  the  Brush  Company  for  doing  city 
lighting.  For  a  number  of  years  there  was  the  most  heated 
and  acrimonious  discussion  between  the  champions  of  the  two 
different  forms  of  current  (direct  and  alternating) ;  but  all  this 


WHOLESALING  OF  ELECTRICITY  51 

has  long  since  passed  away,  and  current  of  both  descriptions 
is  being  used  by  the  large  companies  at  the  present  time;  in 
fact,  among  the  largest  manufacturers  of  alternating  current 
in  the  country  are  the  old  Edison  local  companies,  which  have 
always  kept  the  lead  in  connection  with  central-station  develop- 
ment. 

Some  of  the  earliest  three-wire  central-station  installations 
with  overhead  conductors  were  made  at  Sunbury,  Shamokin 
and  Mt.  Carmel,  Pa.,  and  at  Piqua,  Ohio,  the  early  three-wire 
underground  systems  in  the  smaller  cities  being  laid  in  Brockton, 
Fall  River  and  Lawrence,  Mass.,  Rochester  and  Newburgh, 
N.  Y.,  and  Detroit,  Mich.  Among  the  larger  cities,  Brooklyn, 
Boston  and  Philadelphia  had  Edison  three-wire  plants  in 
operation  before  any  attempt  was  made  to  install  large  central- 
station  three-wire  plants  in  the  West.  It  was  not  until  1887 
that  the  Chicago  Edison  Company  was  organized  by  the  men 
who  originally  controlled  the  Edison  light  and  power  patents 
for  Illinois  and  some  of  the  surrounding  states.  The  Chicago 
Edison  Company  started  with  a  capital  of  $500,000. 

LATTER-DAY  DEVELOPMENT 

In  later  years,  the  old  rivalries  having  passed  away,  the 
Edison  and  alternating-current  plants  have  consolidated,  as 
a  rule,  into  one  organization  in  each  city,  much  to  the  advantage 
of  the  public  in  the  direction  of  lower  prices  and  better  service, 
and  to  the  investor  in  a  better  return  on  money  invested,  owing 
to  the  stoppage  of  the  duplication  of  investment  and  organiza- 
tion. 

Today  in  the  cities  of  the  first  rank  the  central-station 
business  has  got  to  the  point  of  a  vast  manufacturing  business, 
the  tendency  being  to  install  large  turbo-generators  of  from 
10,000  to  15,000  kilowatts  capacity,  producing  high-tension 
alternating  current,  which  is  transmitted  to  rotary  substations, 
where  it  is  transformed  into  direct  current  of  various  pressures 
dependent  on  whether  it  is  to  be  used  for  electric-light  and 
industrial-power  purposes  or  street-railway  work.  In  other 


52  ADDRESSES  OF  SAMUEL  INSULL 

cases  the  substations  are  composed  of  step-down  transformers 
to  reduce  the  voltage  to  that  ordinarily  used  for  alternating 
electric  light  and  power  distribution. 

The  experiences  of  the  last  few  years  have  shown  very  dis- 
tinctly that  if  the  central-station  companies  of  the  large  cities 
are  to  maintain  their  positions,  they  must  go  more  and  more 
into  the  wholesaling  of  electricity  to  large  users,  such  as  street- 
railway  companies,  elevated-railway  companies,  and  possibly 
later  on  to  the  larger  transportation  companies  of  the  country. 

ALL  ELECTRICAL  ENERGY  FOR  A  GIVEN  AREA  SHOULD  BE 
PRODUCED  BY  ONE  ORGANIZATION 

There  is  no  business  that  I  know  of  that  is  benefited  more 
than  the  central-station  business  in  the  way  of  reduced  cost  of 
production  by  the  increased  amount  of  output.  The  intro- 
duction of  the  steam  turbine  is  especially  conducive  to  the 
economical  production  of  electrical  energy  in  very  large  quan- 
tities, both  from  a  capital  and  operating  point  of  view;  and  I 
look  forward  with  confidence  to  the  day  when  the  electrical 
energy  required  in  each  of  our  large  cities  will  be  produced  under 
one  organization  for  each  city,  with  a  few  large  generating  sta- 
tions for  the  production  of  alternating  current,  the  energy  being 
converted  into  whatever  form  may  be  best  adapted  for  the  pur- 
poses for  which  it  is  required. 

A  canvass  of  any  of  the  central  blocks  of  buildings  in  any  of 
our  large  cities  will  show  an  amount  of  investment  in  power- 
producing  machinery  out  of  all  proportion  to  that  which  is 
really  required  to  render  the  service  demanded  within  a  given 
territory.  As  these  plants  deteriorate  and  go  out  of  use,  cen- 
tral-station connections  are  taking  their  place,  leading  to  a 
saving  alike  of  capital  expenditure  and  operating  expenses. 

The  same  remark  will  apply  to  a  canvass  of  the  power  facili- 
ties of  the  various  companies  using  electrical  energy,  such  as  the 
street-railway  companies,  the  elevated-railway  companies  and 
the  interurban-railway  companies,  in  any  given  territory. 

It  is  easy  of  demonstration  that  the  most  economical  thing 


WHOLESALING  OF  ELECTRICITY  53 

to  do  is  to  produce  all  the  electrical  energy  required  in  a  given 
territory  under  one  organization;  and  the  central-station  com- 
pany that  works  toward  this  end  will,  in  my  opinion,  show  a 
far  greater  return  on  the  money  invested  by  its  stockholders  and 
be  able  to  quote  a  lower  price  to  its  customers  than  the  company 
which  undertakes  to  do  the  purely  retail  electric-light  and  in- 
dustrial-power business  of  the  community,  as  the  latter  forms 
but  a  small  portion  of  the  possible  business  offering. 


ELUCIDATION    OF    ELECTRIC-SERVICE 
RATES  FOR  BUSINESS  MEN1 

THIS  subject,  instead  of  being  dealt  with  in  a  summary 
way  as  some  have  suggested,  has  occupied  the  attention 
of  the  legislative  department  of  the  city  government 
for  more  than  two  years.  It  came  up  in  Mayor  Dunne's 
administration,  when  an  ordinance  was  passed  by  the  City 
Council  and  vetoed  by  the  Mayor,  though  it  had  been  adopted 
after  months  of  discussion  and  months  of  investigation,  and 
had  met  with  the  general  approval,  I  think,  of  the  community. 
It  did  not,  however,  happen  to  meet  with  the  approval  of  Mayor 
Dunne.  That  veto,  I  think,  was  rendered  in  June,  1906. 
Late  in  the  autumn  of  1906  Mayor  Dunne  asked  of  Marwick, 
Mitchell  &  Co.,  chartered  accountants  of  this  city  and  New 
York,  their  opinion  as  to  what  should  be  done  in  relation  to  an 
investigation  of  the  rates  of  the  then  Commonwealth  Electric 

1.  Nearly  ten  years  elapsed  between  the  latest  preceding  public  appear- 
ance of  Mr.  Insull,  as  recorded  in  this  book,  and  the  occasion  of  this  speech. 
The  decade  was  a  busy  and  notable  one  in  the  electrical  history  of  Chicago. 
The  historic  Fisk  Street  generating  station  was  put  in  operation  in  1903.  Here 
the  large  turbo-generator  units  which  have  revolutionized  the  methods  of 
generating  electricity  had  their  first  trial,  thanks  to  Mr.  Insull's  boldness  and 
initiative.  This  was  the  first  electric  generating  station  in  the  world  to  be 
equipped  exclusively  with  steam-turbine  generating  units,  and  it  became 
famous.  The  Commonwealth  Electric  Company  and  the  Chicago  Edison 
Company,  of  both  of  which  Mr.  Insull  was  president,  and  both  of  which,  under 
his  direction,  had  absorbed  other  companies,  were  consolidated  in  the  Com- 
monwealth Edison  Company  in  1907.  (It  may  be  stated  here,  as  a  matter  of 
record,  that  Mr.  Insull  was  elected  president  of  the  Commonwealth  Edison 
Company  at  its  formation,  and  that  he  still  occupied  that  position  when  this 
book  was  published.)  The  great  work  of  supplying  the  diversified  electrical 
needs  of  the  city  from  one  source  was  well  under  way.  Large  contracts  had 
been  made  with  surface  and  elevated  railway  companies  for  supplying  elec- 
tricity at  wholesale  rates.  On  March  7, 1908,  a  contract  ordinance  fixing  rates 
was  pending  between  the  Mayor  and  City  Council  of  Chicago  and  the  Com- 
monwealth Edison  Company,  and  it  was  discussed  by  a  number  of  gentlemen 
at  a  luncheon  of  the  City  Club  of  Chicago  on  the  date  mentioned.  One  of  these 
was  Mr.  Insull,  and  a  condensed  report  of  his  remarks  is  given  here. 

54 


RATE-MAKING  EXPLAINED  55 

Company  and  the  Chicago  Edison  Company.  Marwick, 
Mitchell  &  Co.,  in  their  report,  if  I  am  correctly  informed,  re- 
viewed the  rates  of  the  two  companies  and  pronounced  them 
reasonable,  advising  Mayor  Dunne  that  to  make  an  investiga- 
tion into  their  affairs — even  if  he  had  the  right  to  make  it — 
would  be  expensive  and  entirely  unnecessary.  And  this  report 
was  rendered,  gentlemen,  by  the  firm  of  accountants  who 
would  have  been  employed  and  would  have  made  money  out  of 
such  an  investigation.  I  don't  suppose  that  Mayor  Dunne, 
after  his  veto,  would  have  cared  to  publish  that  as  a  reason  for 
not  taking  any  further  action.  At  any  rate,  nothing  further 
was  done  until  the  present  administration1  came  into  office, 
and  the  Mayor  drew  attention  to  the  consolidation  of  the 
Edison  and  Commonwealth  companies,  and  advised  the  gas, 
oil  and  electric-light  committee  of  the  Council  to  take  the  matter 
up.  They  have  been  at  work  on  it  more  or  less  ever  since,  so 
that  instead  of  being  only  a  few  months  old,  this  ordinance 
has  received  the  attention  of  the  authorities  practically  during 
a  period  of  two  years. 

COST  OF  ELECTRIC  LIGHTING  DECREASED  WHILE    COST    OF 
OTHER  COMMODITIES  INCREASED 

Now,  it  is  a  simple  proposition,  gentlemen.  It  is  simply  a 
question  of  getting  a  fair  return  upon  a  given  investment.  We 
do  not  want  anything  more.  The  company  has  been  in  this 
community  longer  than  I  have,  but  I  have  been  in  it  long  enough 
to  look  around  me  and  see  at  least  fifty  men  here  who  know 
full  well  that  all  we  are  looking  for,  and  all  we  get,  is  such 
return  on  our  investment  as  no  man  in  this  room  would  accept 
on  his  private  business. 

Some  of  you  have  seen  this  chart  (Fig.  1)  in  the  newspapers 
and  in  the  street  cars.  It  was  put  out,  gentlemen,  for  the 
purpose  of  getting  business.  I  presume  I  have  spent,  from  first 
to  last,  $20,000  in  advertising  that  curve.  Our  rates  in  1896 
were  on  about  an  average  with  the  rates  of  all  the  companies 

1.  That  of  Mayor  Fred  A.  Busse,  deceased. 


56 


ADDRESSES  OF  SAMUEL  INSULL 


S 

~SE 

IV.GES 

.--" 

^^- 

r^*" 



^=1 

MW 

•COAL 

-*=• 

'i*^ 

-• 

, 

"*Bt 

i 

•7=**" 

•^2 

t^a-- 

«^~ 

^^ 

'? 

INCH 

ASE 

x-^ 

V 

S^ 

/ 

| 

DECK 

ASE 

t 

\ 

j 

I 

\ 

E 

\ 

^^x 



'  ^ 

LIQ 

H?'° 

2 

t~- 

396  18 

DV    lh 

b8    Ib 

w  iy 

oo  iy 

01   19 

IK    Ib 

03    1'j 

04   19( 

ft     IB 

J6    1$ 

)7    19 

J8   190 

Fig.  1.     Decrease  in  Cost  of  Electric  Light  While  Cost 
of  Other  Staples  Increases 


A.M.  P.M. 

Fig.  2.     Load  Diagrams  of  Commonwealth  Edison 
Company,  1907-1908 


RATE-MAKING  EXPLAINED  57 

on  both  sides  of  the  Atlantic.  Practically  nothing  at  that 
time  was  known  about  the  cost,  or  the  principles  governing  the 
cost,  of  electrical  energy.  We  started  in  and,  while  we  have 
not  that  reputation  here  —  judging  from  one  or  two  of  the 
newspapers  —  outside  of  Chicago  we  have  the  reputation  of 
being  the  pioneers  in  low  prices  for  electricity.  I  have  just  this 
last  week  come  back  from  a  hurried  trip  to  London,  and  while 
I  was  on  the  other  side,  as  is  usually  the  case,  I  was  introduced 
to  everybody  as  the  man  who  was  furnishing  electrical  energy 
cheaper  than  any  one  else  in  the  world.  It  was,  therefore, 
probably  very  good  discipline  to  come  back  and  have  the  size 
of  my  cranium  reduced  by  reading  the  criticisms  that  have 
been  passed  on  our  rates  during  the  last  week  since  my  return. 
This  chart  shows  a  reduction  of  between  50  and  60  per  cent 
between  1896  and  1906,  covering  a  period  when  every  class  of 
material  we  use,  every  class  of  labor  we  use,  has  gone  up  tre- 
mendously in  price.  In  August,  1907,  we  made  a  further  re- 
duction that  brought  our  rates  down  to  50  per  cent  of  what  they 
were  in  1896.  Under  this  new  ordinance  they  would  go  down 
in  1908  to  about  45  per  cent  of  what  they  were  in  1896.  In  1909 
they  will  go  down  to  about  40  per  cent.  What  will  happen 
after  that,  gentlemen,  I  don't  know.  Whether  after  a  trial  for 
three  years  of  the  lowest  rates  mentioned  in  the  ordinance  we 
shall  be  able  to  produce  energy  still  cheaper,  I  do  not  know. 
That  is  a  matter  for  the  future. 

INFLUENCE  OF  MAXIMUM  LOAD  ON  RATES 

This  chart  (Fig.  2)  represents  the  total  output  of  our  com- 
pany. The  lower  irregular  line  is  the  load  of  an  average  day 
in  the  middle  of  the  summer  and  the  upper  irregular  line  is 
the  winter  load.  In  summer  the  average  load  bears  the  rela- 
tion of,  say,  35,000  to  the  maximum  of  48,000.  In  winter  the 
average  bears  the  relation  of  48,000  to  95,000.  Now  this  high- 
est peak  is  the  governing  point  of  our  interest  account.  It  is 
the  governing  point  of  all  charges  that  are  not  absolutely  de- 
pendent upon  the  amount  of  our  load.  For  instance,  probably 


58  ADDRESSES  OF  SAMUEL  INSULL 

two-thirds  of  the  amount  of  coal  is  dependent  upon  exactly 
how  much  load  we  have  on  as  a  maximum.  The  other  third 
we  figure  in  with  what  we  might  call  a  fixed  expense,  or  part 
of  our  fixed  charges,  just  like  interest. 

This  rise  and  fall  determines  whether  we  make  money  or 
whether  we  lose  money.  So  close  are  our  finances  connected 
with  our  maximum  load  that  it  would  be  quite  a  possibility  for 
us  to  take,  for  the  same  dollars  and  cents  we  are  receiving  now, 
business  of  such  a  character  that  instead  of  paying  our  stock- 
holders a  return  for  their  money,  we  would  absolutely  lose 
money  for  them.  That  is  the  main  cause,  that  question  of  the 
maximum  load,  of  all  the  trouble  in  fixing  electric-lighting  rates. 
The  gas  company  would  be  subject  to  precisely  the  same  con- 
dition if  it  were  not  for  the  cheapness  of  storage.  Storage  with 
us  is  practically  an  impossibility.  The  Commonwealth  Edison 
Company  has  about  $1,500,000  invested  in  storage  batteries 
in  this  downtown  district.  We  do  not  carry  that  investment  to 
help  us  out  at  a  period  of  maximum  load,  but  solely  to  insure  us 
continuity  of  service. 

COST  OF  SUPPLYING  VARIOUS  CLASSES  OF  CUSTOMERS 

This  chart  (Fig.  3)  gives  five  different  classes  of  consumers. 
The  first  is  the  small  office  building,  where  the  relation  of  the 
maximum  to  the  average  load  is  only  10  per  cent,  or  where  our 
service  would  be  equal  to,  say,  two  and  a  half  hours  out  of  the 
twenty-four.  In  order  to  break  even  we  would  have  to  get 
about  21.5  cents,  or  20  cents,  and  then  22.  With  the  small 
flat,  which  comes  next,  we  come  out  a  little  better,  though  the 
consumption  is  still  very  small.  We  would  not  come  out  quite 
as  well  under  the  new  rate  as  under  the  rate  now  in  existence. 
Our  maximum  should  be  about  15  cents.  We  are  getting  now 
about  14  cents.  It  is  proposed  under  the  new  ordinance  to 
make  12  cents  the  maximum  next  fall,  so  you  see  we  don't 
make  much  money  out  of  small  offices  and  small  flats.  With  the 
larger  flat,  we  can  almost  get  out  at  cost  on  the  new  rates. 
You  can  take  it  as  a  certainty,  gentlemen,  that  all  that  business 


RATE-MAKING  EXPLAINED 


59 


is  a  loss,  figuring  6.5  per  cent  on  money,  6  per  cent  deprecia- 
tion, 1  per  cent  for  taxes  and  0.5  per  cent  for  insurance. 

We  come  next  to  the  average  store.  The  merchant  uses 
light  about  20  per  cent  of  the  time,  or  nearly  five  hours  a  day, 
and  we  begin  to  get  a  little  profit  out  of  him.  As  a  matter  of 


SMALL  OFFICE 
D  FACTOR 


Fig.  3.    Relative  Cost  of  Electric-Lighting  Supply 

fact,  our  money  is  really  made  out  of  our  long-hour  users,  people 
who  use  it  40  per  cent  of  the  time,  nine  and  a  half  hours  a  day, 
and  do  a  wholesale  business. 

Let  me  tell  you,  gentlemen,  that  the  avowed  policy  of  the 
company  is  to  do  its  small  business  at  a  loss  and  make  its 


60  ADDRESSES  OF  SAMUEL  INSULL 

profits  out  of  its  big  customers.  An  investigation  of  our  rates, 
let  it  be  ever  so  extensive,  can  only  give  you  that  information 
finally.  It  will  show  you  that  we  are  discriminating  against 
the  large  concerns  on  State  Street  in  favor  of  the  small  flats  and 
small  people  in  the  outlying  territory.  I  don't  know  that  we 
have  a  right  to  do  that,  but  that  is  the  avowed  policy  of  our 
company,  and  if  it  does  not  suit  the  community,  all  they  have 
to  do  is  to  put  up  our  maximum  rate  to  about  20  cents.  The 
big  man  would  be  protected  and  the  small  man  would  be  com- 
pelled to  pay  more  for  his  light.  The  same  operation  would  give 
the  big  man  a  big  discount.  Mr.  McCormick1  says  he  has 
heard  that  our  rates  for  railway  power  are  $15  per  kilowatt 
per  year,  and  half  a  cent  a  kilowatt-hour.  That  is  so,  with  a 
certain  guaranty  as  to  consumption.  This  is  the  first  time  it 
has  ever  been  made  public,  but  I  have  never  objected  to  its 
being  made  public.  It  is  far  better  for  us,  and  far  more  satis- 
factory, than  supplying  private  houses,  because  it  can  be  done 
without  coming  in  contact  with  any  branch  of  the  city  govern- 
ment, and,  as  I  have  said  before,  any  man  who  has  had  to  deal 
with  public  affairs,  I  don't  care  whether  it  is  the  Mayor  or  the 
Council  or  the  officials  of  the  city  hall,  or  the  public-service 
corporation  man,  will  tell  you  that  the  one  absolutely  desirable 
thing  to  do  is  to  be  able  to  conduct  your  affairs  without  coming 
in  contact  with  the  government. 

A  PLEA  FOR  REGULATED  MONOPOLY 

I  want  you  to  understand  that  I  am  very  much  in  accord 
with  the  regulation  by  the  proper  authorities  of  such  utilities 
as  the  one  I  operate.  I  think  I  am  one  of  the  first  men  in  this 
community  to  advocate  their  proper  regulation,  but  there  is 
one  great  mistake  that  is  being  made  at  the  present  time.  You 
are  trying  to  preserve  competition,  and  at  the  same  time  you 
are  trying  to  regulate  on  a  monopoly  basis.  Now,  in  the 

1.  Mr.  Robert  R.  McCormick,  then  president  of  the  Board  of  Trustees 
of  the  Sanitary  District  of  Chicago.  Mr.  McCormick  had  preceded  Mr.  Insull 
in  the  discussion  and  urged  further  study  of  the  subject.  Except  in  one  or 
two  minor  details,  Mr.  Insull  indorsed  what  Mr.  McCormick  had  to  say. 


RATE-MAKING  EXPLAINED  61 

business  I  manage  there  is  no  justification  for  competition. 
The  building  up  of  a  separate  distribution  system,  for  instance, 
by  the  Sanitary  District,  is  a  financial  absurdity.  Either 
they  ought  to  own  us  or  we  ought  to  buy  their  power.  It  is 
the  same  way  with  the  street-railway  systems.  It  is  the  only 
economical  way  to  do  the  thing,  and  it  has  got  to  come 
finally.  It  has  either  got  to  come  by  private  ownership,  a 
monopoly  thoroughly  protected,  with  regulation  of  the  most 
minute  character  and  publication  of  all  the  figures  of  the  op- 
erating property,  or  else  it  has  got  to  come  by  municipal  owner- 
ship. The  latter,  I  think,  would  be  a  calamity,  but  it  has  got 
to  come  one  way  or  the  other.  As  believers  in  proper  regula- 
tion, we  have  done  all  we  could  to  enable  the  authorities  to 
look  into  our  affairs  and  to  study  them  thoroughly  and  to  come 
to  a  wise  conclusion.  The  only  error,  I  think,  that  has  been 
made  in  the  matter  has  been  that  the  maximum  rate  is  pretty 
low,  so  that  we  must  do  quite  a  large  and  growing  amount  of 
our  business  at  a  loss. 

DISCUSSION  (IN  ABSTRACT) 

MR.  ROSENTHAL  :  I  would  like  to  ask  Mr.  Insull  what  would 
be  necessary  in  order  to  put  his  business  on  a  monopoly  basis, 
assuming  that  we  ought  to  do  so. 

MR.  INSULL:  I  think  it  would  be  necessary  to  get  some 
legislation  before  that  could  be  done,  and  then  probably  work 
out  some  scheme  not  unlike  the  present  street-railway  scheme, 
but  I  think  legislation  would  be  necessary. 

MR.  WALTER  L.  FISHER:  I  am  delighted  to  have  Mr. 
Insull  add  his  voice  publicly  to  the  doctrine  which  some  of  us 
have  been  preaching  for  a  long  time,  that  these  public  utilities 
should  be  natural  monopolies  under  the  protection  of  the  law; 
that  they  should  stand  for  the  utmost  publicity  in  all  the 
details  of  their  affairs,  and  that  they  should  be  effectively  regu- 
lated. I  think  his  statement,  that  it  must  be  one  thing  or  the 
other,  is  a  complete  exhaustion  of  the  subject.  At  the  same 
time  I  am  hardly  able  to  agree  that  it  would  require  legislation. 
I  think  the  only  legislation  that  would  be  necessary  to  give  all 


62  ADDRESSES  OF  SAMUEL  INSULL 

the  monopoly  that  we  could  give,  would  be  legislation  by  the 
City  Council,  and  not  by  the  General  Assembly.  I  know  of  no 
reason,  in  other  words,  why  the  Sanitary  District  could  not  sell 
to  the  Commonwealth  Edison  its  power  at  a  lump  price,  pro- 
vided that  power  was  again  to  be  sold  to  the  citizens  at  simply 
a  fair  return  on  the  business  of  the  company. 

Of  course,  if  it  is  true  that  the  small  flat  and  the  still  smaller 
household  consumer  in  the  chart  which  Mr.  Insull  has  shown 
here  is  getting  his  electricity  at  less  than  cost,  that  raises  a 
very  interesting  question  as  to  how  far  it  is  public  policy  to 
permit  that  to  be  done.  Personally  it  seems  to  me  that  if  they 
fix  a  maximum  rate,  say  of  15  or  20  cents  for  a  single  lamp  for 
an  hour,  or  whatever  the  unit  of  measurement  is  on  this  large 
class  of  consumers  who  only  use  that  large  rate  and  never  would 
be  using  the  secondary  rate,  then  they  should,  in  fixing  the 
secondary  rate,  take  into  consideration  that  particular  class  of 
customers.  It  seems  to  me  that  this  question  is  entitled  to 
greater  consideration,  because  I  would  assume  that  they  repre- 
sent, perhaps,  the  great  mass  of  the  people  of  this  city,  in  num- 
bers, at  least,  who  are  consumers  of  electric  light.  I  may  be 
wrong  in  my  deduction  from  the  facts,  but  that  is  what  im- 
presses itself  upon  my  mind.  Now,  the  question  as  to  whether 
we  should  compel  the  electric-lighting  company  to  furnish  at 
cost,  or  below  cost,  to  the  small  consumers  as  a  matter  of  public 
policy  is  one  that  deserves  consideration.  Perhaps  it  is  like 
the  method  which  has  been  adopted  in  the  use  of  water  in  this 
city.  In  most  discussions  of  water  rates  it  is  conceded  that 
public  policy  requires  the  furnishing  of  water  to  the  small  con- 
sumer even  at  a  loss,  that  it  is  public  policy  to  have  water  used 
by  the  small  consumer  and  to  make  his  rates  low,  even  unduly 
low.  I  suppose  that  the  widespread  distribution  and  use  of 
electric  light  throughout  the  city  is  a  public  consideration  that 
perhaps  this  matter  has  some  bearing  upon.  That,  at  any  rate, 
seems  to  me  to  be  the  main  question. 

MR.  INSULL:  There  are  just  two  points  I  wish  to  speak  on, 
and  then  I  am  through.  One  is  our  interest  in  having  this 
ordinance  cleaned  up  and  out  of  the  way.  Now,  we  have  to 


RATE-MAKING  EXPLAINED  63 

raise  very  large  sums  of  money.  I  have  before  me  here  a  state- 
ment of  the  amount  of  money  that  we  have  put  in  year  by  year 
for  the  last  fifteen  years.  I  won't  burden  you  with  it,  but  even 
in  this  year,  which  is  not  a  year  when  public-service  corporations 
are  trying  to  extend  their  business  —  but  are  trying  rather  to 
curtail  —  our  expenditures  this  year  will  be  somewhere  between 
two  and  three  million  dollars  for  extensions.  Last  year  they 
were  between  three  and  four  millions  of  dollars.  The  year 
before  they  were  between  four  and  five  millions  of  dollars,  and 
for  the  year  before  that  between  three  and  four  millions  of  dol- 
lars. Now,  gentlemen,  the  agitation  of  this  subject  —  its 
being  left  in  the  air  for  so  long — has  cost  us,  in  my  opinion, 
about  one  per  cent  additional  for  money  we  have  had  to  raise 
in  the  last  two  years.  There  is  no  question  about  it.  Now, 
we  don't  have  to  pay  it.  I  am  talking  with  entire  candor.  It 
comes  out  of  the  consumer  finally.  All  we  can  ever  expect 
is  a  fair  return  on  money  in  vested.  My  own  judgment  is  that 
no  public-service  corporation  wisely  administered  in  the  fu- 
ture will  get  much  more  than  six  per  cent  on  its  investment.1  If 
the  money  we  borrow  costs  us  an  excessive  amount  it  is  a  big 
part  of  the  cost  of  our  operation,  and  the  longer  this  matter  is 
left  open  the  more  trouble  we  will  have  in  raising  funds.  You 
have  had  a  great  example  of  that  in  this  community.  You 
have  had  here  the  Chicago  City  Railway  Company  and  the 
Chicago  Union  Traction  Company.  Owing  to  troubles,  rightly 
or  wrongly,  over  the  question  of  their  life  and  ordinances,  the 
properties  went  down  from  month  to  month  and  from  week 
to  week.  Now,  if  we  are  put  in  a  position  where  we  cannot 
raise  the  necessary  money  on  favorable  terms  —  this  business 
will  require  an  average  of  about  four  million  dollars  of  new 
money  a  year  for  the  next  twenty  years  to  come  —  why,  we 
simply  cannot  expect  to  give  the  service  or  the  low  prices. 

1.  It  is  probable  that  Mr.  Insull  referred  here  to  the  total  cash  investment. 
It  might  be  added  also  as  a  fair  deduction  that  if  a  company  is  able  to  borrow 
money  at  a  low  rate  on  bonds  it  should  not  be  precluded  from  paying  dividends 
on  stock  at  a  higher  rate.  Further,  it  may  be  borne  in  mind  that  the  ruling  rates 
for  money  at  the  time  this  statement  was  made  in  an  offhand  discussion  were 
entirely  different  from  those  prevailing  at  the  present  day,  seven  years  later. 


64  ADDRESSES  OF  SAMUEL  INSULL 

There  was  one  thing,  I  think,  which  Mr.  Fisher  said  which 
might  give  an  erroneous  impression.  He  said  it  might  be  a 
question  of  public  policy,  selling  energy  for  a  loss  to  the  small 
consumer.  We  started  that  as  an  experiment  before  there  was 
any  question  of  regulation.  We  are  hoping  to  stimulate  the  use 
of  electricity  outside  the  center  of  the  town,  so  that  eventually 
our  fixed  charges  might  possibly  be  reduced,  and  then  our  cost 
would  consequently  go  down.  I  think  it  would  be  a  great 
mistake  to  change  that  situation  at  the  present  time.  On  the 
other  hand,  if  you  attempt  to  classify  our  rates  by  ordinance, 
you  will  inevitably  put  up  the  cost  to  the  small  consumer,  stifle 
the  use  by  the  small  consumer,  and  put  down  the  cost  to  the 
people  who  can  best  afford  to  pay  for  it.  A  large  consumer  is 
well  able  to  regulate  his  own  price  because  the  price  has  to 
come  to  a  point  where  it  will  compete  with  his  own  plant. 

MR.  GEORGE  E.  HOOKER:  These  charts,  presented  to  us 
by  Mr.  Insull,  are  the  charts  of  the  Commonwealth  Edison 
Company.  They  are  not  the  charts  of  a  disinterested  party. 
The  charts  of  a  disinterested  party,  the  material,  the  opinion, 
the  conclusions  and  recommendations  of  a  disinterested  party, 
are  what  must  count;  and  these  we  lack. 

MR.  INSULL:  If  Mr.  Hooker  is  willing,  I  will  undertake 
to  put  at  his  disposal  here  evidence  between  now  and  the  public 
hearing  to  enable  him  to  prove  the  correctness  or  incorrectness 
of  those  charts.  I  do  not  present  those  charts  as  the  president 
of  the  Commonwealth  Edison  Company.  I  present  those 
charts  as  an  expert  in  this  line  of  business,  the  oldest  expert 
in  the  business,  and  I  stake  my  reputation  on  those  things. 
They  are  simply  absolutely  true.  It  is  not  a  question  whether 
they  are  the  charts  of  the  Commonwealth  Edison  Company  or 
the  Sanitary  District,  or  Tom,  Dick  or  Harry.  They  are 
absolutely  susceptible  of  proof. 


CITY    CLUB    DISCUSSION    OF   THE    21,000- 

KILOWATT  CONTRACT  WITH  THE 

CHICAGO  CITY  RAILWAY 

COMPANY1 

MR.  WALTER  L.  FISHER:  In  January,  1907,  about  a 
month  before  the  [traction  settlement]  ordinances 
were  passed  by  the  City  Council  —  they  were  passed 
on  February  11,  1907  —  the  Chicago  City  Railway  Company 
made  a  contract  with  the  Chicago  Edison  Company,  or  the 
Commonwealth  Edison  Company,  for  practically  all  of  its 
electrical  current.  I  believe  the  amount  specified  in  the  con- 
tract was  21,000  kilowatts.  *  *  *  The  Commonwealth 
Edison  Company  undertakes,  for  a  period  of  ten  years  and 
thereafter,  so  long  as  the  City  Railway  Company  desires  to 
continue,  to  furnish  it  the  necessary  electric  power  for  its  entire 

1.  One  of  Mr.  Insull's  important  achievements,  in  carrying  out  in  practice 
his  theories  of  regulated  monopoly  in  electricity  supply,  making  economic 
use  of  the  community's  diversity  factor,  was  the  making  of  contracts  with  the 
electrically  operated  elevated  and  surface  railways  of  Chicago.  Almost  uni- 
versally the  large  electric-railway  companies  had  manufactured  their  own 
electrical  energy  as  a  matter  of  course,  and  it  required  boldness  and  confidence 
as  well  as  sound  reasoning  to  convince  these  shrewd  public-utility  operators 
that  it  was  to  their  advantage  to  discontinue  the  generation  of  electricity. 
The  situation  in  Chicago,  where  a  Board  of  Supervising  Engineers  was  placed 
in  charge  of  traction  affairs  in  1907,  made  it  necessary  for  that  body  to  approve 
a  contract  by  which  the  Chicago  City  Railway  Company  agreed  to  purchase 
all  its  electrical  energy  from  the  Commonwealth  Edison  Company.  On  October 
19,  1908,  while  this  contract  was  pending,  the  subject  was  discussed  at  a  lunch- 
eon of  the  City  Club  of  Chicago.  Portions  of  a  report  of  that  discussion  are 
here  reprinted  from  The  City  Club  Bulletin.  Dr.  Charles  E.  Merriam,  who 
presided  at  the  meeting,  is  now  (March,  1915)  professor  of  political  science 
in  the  University  of  Chicago  and  alderman  from  the  Seventh  Ward  of  Chicago. 
Mr.  Walter  L.  Fisher,  special  traction  counsel  for  the  city,  was  afterward  Sec- 
retary of  the  Interior  in  President  Taft's  cabinet.  Mr.  Bion  J.  Arnold,  chair- 
man of  the  Board  of  Supervising  Engineers,  is  a  past-president  of  the  American 
Institute  of  Electrical  Engineers.  Mr.  George  E.  Hooker  is  civic  secretary 
of  the  City  Club. 

65 


66  ADDRESSES  OF  SAMUEL  INSULL 

and  complete  operation.  The  contract  is  for  a  ten-year  period, 
but  contains  a  provision  that  whenever  the  City  Railway  Com- 
pany demands  additions  to  the  service  the  contract  is  arbitrarily 
extended  three  years  from  the  date  of  any  such  requirement. 
The  City  Railway  Company  must  take  all  of  its  power  from 
the  Commonwealth  Edison  Company  for  seven  years.  From 
that  time  on  the  City  Railway  Company  may  manufacture  its 
own  electric  power  for  any  excess  that  arises  after  the  seven 
years,  the  body  of  the  contract  running  to  the  end  of  the  ten- 
year  period,  but  the  excess  being  supplied  by  the  company 
itself. 

WHY  ELECTRICAL  ENERGY  is  CHEAP  IN  CHICAGO 

MR.  BION  J.  ARNOLD  (after  reciting  different  methods  by 
which  the  Chicago  City  Railway  Company  could  have  pur- 
chased or  manufactured  electricity):  None  was  satisfactory. 
We  couldn't  afford  any,  though  we  decided  it  would  be  cheaper 
to  build  our  own  plant  than  to  pay  the  Commonwealth  Edison 
Company  the  price  that  that  company  at  that  time  asked, 
which  was  $15  per  kilowatt,  primary  charge,  per  year,  and  0.5 
of  a  cent  per  kilowatt-hour  for  the  energy  consumed.  But 
the  contract,  as  it  stands  today,  allows  the  railway  company 
to  purchase  its  power  at  $15  per  year  per  kilowatt,  primary 
charge,  and  0.4  of  a  cent  per  kilowatt-hour  consumed,  the 
difference  between  the  0.4  and  the  0.5  throwing  the  decision  in 
favor  of  the  Commonwealth  Edison  Company.  And  I  want 
to  tell  you,  gentlemen,  it  was  no  easy  task  to  convince  Mr. 
Insull  that  he  ought  to  accept  that  figure,  but  the  company  suc- 
ceeded in  doing  it,  backed  by  the  engineers,  who  said  they  could 
not  afford  to  pay  more  than  that  and  would  not.  Mr.  Insull 
finally  reluctantly  came  to  that  figure,  and  we  have  the  con- 
tract prepared.  I  believe  it  to  be  a  sound  and  safe  and  ad- 
visable contract  to  enter  into. 

One  thing  more  may  be  said  —  namely,  a  word  or  two  about 
the  facilities  of  the  Commonwealth  Edison  Company  to  furnish 
this  power.  It  is  not,  perhaps,  generally  known  among  non- 


STREET-RAILWAY  CONTRACT  67 

technical  men,  and  it  is  only  due  Mr.  Insull  and  his  technical 
staff  and  business  organization  to  say,  that  Chicago  possesses 
the  most  up-to-date  power  plant  in  the  world,  the  greatest 
power  plant  by  far  in  capacity  that  has  ever  been  built,  and 
that  power  is  being  produced  in  Mr.  Insull's  plant  for  less  money 
per  kilowatt-hour  than  in  any  other  place  on  earth.  And 
Chicago  has  developed  that  system.  That  is  one  reason  why 
we  can  afford  to  buy  that  power  now,  and  buy  it  at  a  cost  that 
is  the  same  as  we  can  produce  it  for  ourselves,  or  probably  a 
little  less.  It  is  a  great  thing  for  this  country,  for  the  technical 
men  especially.  So  much  so  that  when  Europeans  come  over 
here  the  first  place  they  head  for  is  Chicago  and  the  Common- 
wealth Edison  plant.  I  mean  men  interested  in  that  particular 
line  of  work. 

ECONOMIC  SIGNIFICANCE  OF  THE  CONTRACT 

MR.  SAMUEL  INSULL:  When  this  contract  was  originally 
drawn,  our  proposition  was  based  upon  a  ten-year  period.  It 
is  not  a  good  financial  proposition  for  a  less  period.  The  City 
Railway  consumption  will  run  up  to  not  less  than  40,000  kilo- 
watts, calling  for  an  investment,  in  my  judgment,  of  around 
$7,000,000.  The  total  possible  income  from  this  business,  over 
a  period  of  ten  years,  if  we  get  all  the  business,  is  $14,000,000. 
Anyone  in  this  room  can  figure  how  much  of  that  $14,000,000 
has  got  to  be  spent  in  interest  and  depreciation,  and  how  little 
is  left  for  operating  expenses,  taxes,  insurance  and  profits.  It 
was  only  after  much  discussion  that  we  made  the  concession 
relative  to  the  last  three  years'  increase.  It  is  a  distinct  ele- 
ment of  this  contract  that  we  shall  have  the  exclusive  right  of 
supplying  the  City  Railway  with  energy.  Our  price  is  based 
upon  that  exclusive  right. 

I  myself  and  those  who  work  with  me  have  a  decided  opinion 
as  to  how  the  electrical  energy  used  in  a  community  like  this 
should  be  produced.  We  believe  that  it  should  be  produced  as 
a  monopoly,  and  this  contract  is  in  that  direction.  It  means 
cheaper  electricity  for  the  City  Railway  Company;  it  means 


68  ADDRESSES  OF  SAMUEL  INSULL 

cheaper  electricity  for  the  smallest  user  of  power  or  light  in  this 
community,  and  in  that  respect  I  think  we  are  making  a  record 
here  in  Chicago  far  in  advance  of  what  is  being  done  in  any  city 
on  either  side  of  the  Atlantic.  If  I  were  considering  this  con- 
tract by  itself,  I  would  not  recommend  to  any  body  of  financiers 
the  providing  of  $7,000,000  to  fulfill  the  conditions  of  this 
contract.  I  could  not  show  them  any  profit  in  the  operation  by 
itself.  It  has  to  be  taken  in  connection  with  the  whole  of  our 
business,  with  practically  a  monopoly  of  the  production  of 
electrical  energy  in  this  community. 

I  was  very  loth  to  make  the  concession  as  to  the  last  three 
years,  and  did  it  after  Mr.  Arnold  and  his  associates  had  pointed 
out  that  it  was  an  unreasonable  position  to  put  the  City  Railway 
in  —  namely,  that  they  would  have  to  build  a  plant  to  take  care 
of  their  entire  business  on  a  given  day;  and  it  was  on  that  basis 
that  we  conceded  the  three  years'  increase.  We  certainly 
would  not  have  consented  to  their  going  out  and  purchasing  the 
energy,  because  it  would  have  been  at  absolute  variance  with 
the  basis  on  which  we  were  negotiating.  We  were  negotiating 
to  prevent  a  duplication  of  investment,  and  that  we  have 
accomplished  in  this  contract. 

Suppose  that  we  are  all  wrong  in  our  figures.  Suppose  Mr. 
Arnold  and  his  office,  and  the  Board  of  Supervising  Engineers, 
and  the  City  Railway  Company  are  all  wrong,  and  that  this 
should  be  so  advantageous  a  contract,  netting  us  so  much 
money  out  of  it  as  to  make  it  a  hardship  on  the  city,  the  effect, 
nevertheless,  of  this  contract  would  be  to  help  lower  the  cost  of 
production  of  the  energy  that  we  sell  to  the  smallest  users. 
Every  five  years  the  city  of  Chicago  has  the  right  to  regulate 
our  rates,  based  on  our  cost,  to  our  regular  retail  customers;  so 
the  thing  would  practically  adjust  itself  so  far  as  the  community 
is  concerned. 

Mr.  Fisher  referred  to  a  board  of  arbitration.  The  Com- 
monwealth Edison  Company,  in  making  this  contract,  has 
placed  itself  in  a  position  practically  where  it  nominates  one 
member  of  a  board  of  three  arbitrators,  and  the  other  party  to 
the  contract  (because,  after  all,  the  interests  of  the  city  and  the 


STREET-RAILWAY  CONTRACT  69 

interests  of  the  City  Railway  Company  are  identical)  has  the 
right  to  appoint  the  other  two  members  of  the  arbitration  board. 

WHY  THE  EDISON  COMPANY  CAN  AFFORD  TO  SELL  so  CHEAPLY 

MR.  ARNOLD:  There  is  one  point  which  I  did  not  make 
clear,  as  to  how  the  Commonwealth  Edison  Company  can 
afford  to  produce  this  power  at  the  cost  the  railway  can  make 
it  for,  and  at  the  same  time  make  a  profit.  The  first  element 
in  it  is  that  the  Edison  company  is  in  business  on  a  large  scale, 
manufacturing  power  and  selling  it  throughout  the  city.  Of 
course,  it  can  manufacture  at  a  very  low  cost,  as  I  previously 
pointed  out. 

The  other  point  is  that  the  Chicago  City  Railway  Company 
would  have  to  produce  its  power  in  units  of  about  5,000  kilo- 
watts capacity  each,  in  order  to  have  units  that  would  divide 
up  during  the  24-hour  load  period,  shutting  one  down  and 
starting  others  up,  so  as  to  make  them  work  economically  during 
that  period.  The  load,  you  understand,  on  the  railroad  is  very 
high  hi  the  morning,  down  through  the  day  and  high  again  in 
the  evening,  and  down  again  in  the  night.  To  handle  that  kind 
of  a  load  would  require  electrical  units  of  about  5,000  kilowatts 
capacity.  The  Commonwealth  Edison  Company,  however,  is 
now  installing  electrical  units  of  14,000  kilowatts  capacity,1 
nearly  three  times  as  much,  you  see.  The  cost  of  the  kilowatt 
capacity  of  an  electrical  plant  varies  with  the  size  of  the  unit. 
The  smaller  the  unit  the  higher  the  cost  per  kilowatt,  conse- 
quently the  larger  the  unit  the  lower  the  cost;  and,  therefore,  the 
investment  Mr.  Insull  has  to  make  in  this  plant  is  less  per 
kilowatt  than  the  Chicago  City  Railway  Company  would  have 
to  make. 

The  difference  in  the  fixed  charges  on  that  investment,  and 
the  difference  hi  the  cost  of  operating  large  units,  which  take 
fewer  men  per  kilowatt-hour  output,  makes  just  the  difference 
between  what  it  would  cost  the  Chicago  City  Railway  Company 

1.  Seven  years  later  this  figure  of  14,000  kilowatts  rating  in  generator  units 
could  be  changed  to  30,000  kilowatts. 


70  ADDRESSES  OF  SAMUEL  INSULL 

to  make  this  electricity  and  what  it  would  cost  Mr.  Insull  to 
make  it;  and  that  difference  is  Mr.  Insull's  profit. 


EFFECT  OF  PERIODICITY  EXPLAINED 

MR.  GEORGE  E.  HOOKER:  I  would  like  to  ask  Mr.  Arnold 
if  the  different  form  of  electricity  produced  by  the  Sanitary 
District  would  stand  in  the  way  of  its  being  utilized  on  the 
West  Side?  (Referring  to  Chicago  Railways  Company.) 

MR.  ARNOLD:  Yes,  sir. 

MR.  HOOKER:  So  it  is  not  any  more  likely  to  be  used  there 
than  anywhere  else? 

MR.  FISHER:  I  don't  know  whether  Mr.  Ellicott1  is  in  the 
room,  but  the  estimate  given  to  me  was  that  reduction  would 
add  about  13  per  cent  to  the  cost. 

MR.  HOOKER:  Then  I  would  like  to  ask  Mr.  Arnold,  if  it  is  a 
proper  question  to  ask  here,  why  it  is  that  those  methods  are 
different? 

MR.  FISHER:  Why  is  one  60-cycle  and  the  other  25? 

MR.  ARNOLD:  The  reason  is  this:  This  question  of  frequency 
has  been  a  subject  of  debate  among  engineers  ever  since  we 
started  in  on  electrical  work.  We  started  in  with  120  cycles, 
the  idea  being  that  the  higher  the  frequency  the  better  the  en- 
ergy is  for  electric  lighting.  We  started  in  with  electric  light- 
ing, you  understand.  As  the  frequency  comes  down,  the  poorer 
it  is  for  lighting.  When  it  gets  down  to  25  cycles  you  can  see 
the  fluctuation  in  an  incandescent  lamp.  You  can  run  lamps 
on  25  cycles,  but  they  are  not  satisfactory;  consequently,  plants 
that  are  installed  for  lighting  purposes  only  are  usually  installed 
with  a  moderately  high  frequency.  To  get  at  something  that 
could  be  used  for  power  in  small  quantities,  and  for  lighting 
also,  the  standard  has  become  60  cycles  for  lighting.  You 
can  run  60-cycle  motors.  Sixty-cycle  motor-generators  or 
rotary  converters  are  being  used  for  railroad  purposes,  but  none 
of  them  has  been  constructed  yet  above  500  kilowatts.  Very 

1.  Electrical  engineer  of  the  Sanitary  District  of  Chicago. 


STREET-RAILWAY  CONTRACT  71 

few  have  as  much  as  that.  Most  of  them  are  about  250  kilo- 
watts, and  are  not  giving  entirely  satisfactory  service. 

With  the  state  of  the  art  such  that  we  cannot  buy  those 
rotary  converters  above  500  kilowatts  —  the  size  the  Chicago 
City  Railway  Company  is  using  now  being  2,000  kilowatts  — 
you  see  it  is  impracticable  for  us  to  consider  60  cycles  in  the 
railroad  business.  The  25 -cycle  frequency  is  better  for  power 
purposes.  The  lower  the  frequency,  the  better  for  power  pur- 
poses. Consequently,  we  have  two  antagonistic  elements 
working  there,  the  higher  frequency  the  better  for  lighting,  the 
low  frequency  the  better  for  power. 

So  we  tried  to  harmonize  them  to  60-cycle  frequency  for 
lighting  and  small  power.  Railway  work  we  have  cut  down  to 
25  cycles.  All  of  the  machinery  installed  for  the  Chicago  City 
Railway  Company  and  for  the  Chicago  Railways  Company  is 
at  25  cycles;  consequently  if  we  buy  power  from  any  other 
source  that  produces  it  at  any  different  frequency,  we  have  got 
to  put  in  a  motor-generator  or  rotary  converter.  The  cost  of 
that  machine,  with  interest,  depreciation  and  operating  charge, 
makes  this  difference  in  price. 

How  THE  EDISON  COMPANY  MET  THE  QUESTION  OF 
FREQUENCY 

CHAIRMAN  MERRIAM:  I  would  like  to  ask  Mr.  Insull  how 
the  Commonwealth  Edison  Company  combines  those  two  things, 
the  lighting  and  the  power? 

MR.  INSULL:  Part  of  the  answer  I  would  prefer  not  to  give, 
because  I  do  not  care  to  get  launched  on  the  subject  of  criticism 
of  competitors. 

When  the  Commonwealth  Edison  Company,  or,  rather,  its 
predecessor,  came  to  the  conclusion  that  what  it  wanted  to  do 
was  to  monopolize  the  production  of  power  in  this  community, 
it  also  came  to  the  conclusion  that  the  easiest  way  to  do  that 
would  be  to  give  the  very  large  users  of  power  their  energy  with 
the  least  possible  conversion;  and,  where  conversion  is  necessary, 
to  confine  it,  as  far  as  it  possibly  could,  to  its  own  business. 


72  ADDRESSES  OF  SAMUEL  INSULL 

In  any  event,  in  order  to  deal  with  the  business  in  the  down- 
town district,  our  company  would  have  to  convert,  whether  we 
produced  60  cycles  or  25  cycles,  as  we  convert  from  alternating 
current  to  direct  current.  The  problem  before  us  was  how  to 
deal  with  the  territory  outside  the  center  of  town,  where  you 
distribute  over  a  much  wider  area  and  supply  in  much  smaller 
quantities,  except  for  such  large  consumers  as  the  street  and 
elevated  railways,  and  certain  very  large  manufacturers. 
We  decided  it  was  better  to  confine  the  conversion  to  our  own 
stations;  and  for  lighting  purposes  we  converted  outside  of 
the  center  of  town  from  25  cycles  to  60  cycles. 

MR.  ARNOLD:  You  generated  at  25  and  converted  it? 

MR.  INSULL:  We  generate  at  25.  The  wisdom  of  that 
decision  is  best  shown  by  my  stating  that  more  than  70  per 
cent  of  our  production  is  used  as  25-cycle  energy  by  our  cus- 
tomers. 


THE  LARGER  ASPECTS  OF  MAKING  AND 
SELLING  ELECTRICAL  ENERGY1 

MY  THEME  for  this  evening  relates  to  no  new  subject. 
It  is  one  we  have  been  discussing  for  many  years  — 
the  question  of  rates,  the  question  of  how  to  sell  our 
manufactured  product.  There  are  a  number  of  essentials 
which  we  must  know  before  we  can  decide  upon  the  selling 
price.  We  must  know,  first  of  all,  the  cost  of  manufacture. 
We  must  know  the  elements  that  go  to  make  up  that  cost  and 
whether  we  have  the  most  economical  possible  plant  with  which 
to  produce  our  goods.  Let  me  say,  in  passing,  that  the  very 
best  monument  that  any  of  you  can  erect,  indicating  the  suc- 
cessful operation  of  your  business,  is  a  first-class  junk  pile.  I 
do  not  think  there  is  any  country  where  manufacturing  is 
carried  to  a  higher  economical  point  than  in  the  United  States; 
but  I  am  sorry  to  say  that  I  think  that  there  are  but  few  manu- 
facturing businesses  hi  the  United  States  where  the  tendency 
of  the  proprietor  is  to  hold  on  to  his  uneconomical  machinery 
to  the  extent  that  a  number  of  our  friends  in  the  electric-light- 
ing business  hold  on  to  their  uneconomical  manufacturing 
plants. 

1.  An  address  delivered  before  the  Association  of  Edison  Illuminating 
Companies  at  Briarcliff,  N.  Y.,  on 'September  1,  1909.  This  important  utter- 
ance indicates  the  breadth  of  vision  which  Mr.  Insull  had  now  attained  in 
relation  to  the  economics  of  electric  service.  On  this  occasion  the  author, 
for  perhaps  the  first  time  in  addressing  an  audience,  spoke  in  positive  terms  on 
the  larger  aspects  of  the  electricity-supply  business.  He  expounded  the  funda- 
mental laws  of  the  central-station  industry  before  the  leading  men  engaged  in 
that  industry,  and  it  took  some  courage  to  advocate  conceptions  and  methods 
that  were  almost  revolutionary.  The  philosophy  of  the  unified  or  syndicate 
operation  of  electric  central-station  properties  is  set  forth  here  with  ability 
and  candor.  The  importance  of  diversity  factor  is  emphasized  in  this  and 
succeeding  papers.  The  speaker  was  not  without  the  courage  of  his  convic- 
tions, for  within  two  or  three  years  he  had  engaged  in  the  unification  of  elec- 
tric-service properties  on  a  much  more  extensive  scale  than  ever  before. 

73 


74  ADDRESSES  OF  SAMUEL  INSULL 

We  assume  that  we  are  in  the  business  of  controlling  the 
generation  of  energy  in  the  communities  in  which  we  live. 
My  figures  are  necessarily  taken  from  my  experience  in  Chicago; 
but  let  me  tell  those  of  you  who  run  small  plants  that  my 
experience  in  operating  small  plants  leads  me  to  the  conclu- 
sion that  the  same  principles  that  govern  the  business  in  its 
operation  in  a  city  of  over  two  millions  of  people  also  applies 
to  cities  from  25,000  up  to,  say,  200,000  people.  The  situation 
in  Chicago  is  this:  Our  output  for  the  year  ended  June  30, 
1909,  amounted  to  414,000,000  kilowatt-hours.1  We  did  a  fair 
proportion  of  street-railway  business.  Our  light-and-power 
business  (that  is;  the  ordinary  business  run  by  electric-light- 
ing companies  throughout  the  country)  amounted  to  184,000,- 
000  kilowatt-hours,  while  our  street-railway  business  amounted 
to  230,000,000  kilowatt-hours,  so  that  of  the  414,000,000  kilo- 
watt-hours generated,  more  than  half  went  to  street  railways. 
In  addition  to  the  amount  bought  from  us,  the  street-railway 
companies  probably  produced  themselves  230,000,000  kilowatt- 
hours,  so  that  if  we  had  had  their  entire  business,  and  added 
it  on  to  what  we  produced,  our  output  would  have  reached  the 
imposing  figure  of  644,000,000  kilowatt-hours. 

Stop  for  a  moment  and  consider  what  a  small  proportion 
of  the  production  of  energy  goes  to  the  ordinary  electric-light- 

1.  For  comparison,  it  may  be  stated  that  the  Commonwealth  Edison 
Company  generated  the  great  total  of  1,114,000,000  kilowatt-hours  of  electrical 
energy  in  the  calendar  and  fiscal  year  ended  December  81,  1914.  This  is 
probably  the  largest  output  of  any  individual  electricity-supply  system  in  any 
city  in  the  world.  Of  the  amount  mentioned  642,000,000  kilowatt-hours 
was  for  railway  customers  and  the  remaining  472,000,000  kilowatt-hours  was 
for  light-and-power  customers.  Comparing  the  reports  of  June  30,  1909,  and 
December  31,  1914,  it  will  be  seen  that  in  the  period  of  five  and  one-half  years 
the  total  output  increased  169  per  cent,  the  railway  output  increased  179  per 
cent,  and  the  output  for  light-and-power  customers  increased  157  per  cent. 
Practically  all  of  the  electrical  energy  required  by  the  surface  street  railways 
and  elevated  railways  of  Chicago  is  now  (1915)  supplied  by  the  Commonwealth 
Edison  Company.  At  the  same  time  industrial  users  and  small  consumers 
have  been  assiduously  cultivated,  for  the  total  number  of  customers  on  the  com- 
pany's books  on  February  1,  1915,  was  about  254,000.  The  rates  for  the  small- 
est residence  customers  are  ten,  five  and  three  cents  a  kilowatt-hour,  depending 
on  the  number  of  hours'  use  of  the  maximum  demand.  Thus  the  electrical 
situation  in  Chicago  would  seem  to  confirm  the  essential  soundness  of  Mr. 
InsuU's  doctrines  in  relation  to  electric  service. 


LARGER  ASPECTS  75 

and-power  customer.  We  in  Chicago  have  the  credit,  rightly 
or  wrongly,  for  pushing  our  business  with  reasonable  vigor, 
but  the  above  figures  show  that  if  we  had  all  the  street-railway 
business,  our  ordinary  light-and-power  business  would  amount 
to  less  than  one-third  of  the  whole.  And  that  is  not  the  whole 
story  of  the  amount  of  energy  produced.  Our  estimate  is 
that  isolated  plants,  manufacturing  plants,  industrial  plants 
and  other  consumers  offer  the  possibility  of  405,000,000  kilo- 
watt-hours yet  to  be  obtained.  This  does  not  take  into  con- 
sideration the  growth  of  the  city  at  all;  the  consumption  of 
electricity  mentioned  is  right  at  our  door.  If  we  can  produce 
it  economically  enough,  and  if  we  discover  the  right  way  to 
sell  it,  there  is  a  block  of  400,000,000  kilowatt-hours  that  we 
should  secure. 

SUPPLYING  ALL  THE  DEMANDS  OF  THE  COMMUNITY,  INCLUDING 
RAILWAYS 

Take  another  phase  of  the  question  —  the  electrification  of 
the  terminals  of  the  steam  railroads.  All  we  can  do  in  this 
case  is  to  estimate,  and  our  estimate  is  that  it  would  take  about 
205,000,000  kilowatt-hours  to  take  care  of  the  steam-railroad 
terminals  centering  in  Chicago.  All  that  energy  should  be 
produced  by  one  concern,  and  such  will  be  the  case  eventually. 
There  is  no  more  reason  for  the  existence  of  a  series  of  different 
generating  stations  in  a  city  than  there  is  for  the  existence  of 
a  great  many  isolated  gas  plants  in  a  community.  If  all  that 
energy  were  produced  by  one  organization  (I  care  not  whether 
it  is  the  local  electric-lighting  company,  or  whether  that  com- 
pany buys  power  from  a  power  company),  we  could  get  down 
to  rock-bottom  in  cost  of  production  and  consequently  rock- 
bottom  in  our  rates  of  selling.  The  trend  of  the  times  is  to- 
ward concentration  of  production;  it  is  inevitable  that  it  must 
come.  Ours  is  a  business  which  is  a  natural  monopoly.  It 
matters  not  what  the  legislation  of  the  moment  may  be,  what 
the  opinions  of  the  politicians  may  be,  what  our  own  opinions 
may  be,  eventually,  all  the  electrical  energy  for  a  given  area 
must  be  produced  by  one  concern. 


76  ADDRESSES  OF  SAMUEL  INSULL 

The  total  demands  under  consideration  would  amount  to 
1,254,000,000  kilowatt-hours  in  Chicago.  Take  that  on  a 
percentage  basis.  The  total  light-and-power  business  of  a 
company  as  large  as  the  Commonwealth  Edison  Company, 
having  invested  in  its  business  somewhere  between  $55,000,000 
and  $60,000,000  in  cash,  amounts  to  14.7  per  cent  of  the  whole. 
The  street-railway  business  amounts  to  36.6  per  cent  of  the 
whole.  The  isolated  plants  and  the  industrial-power  business 
that  we  have  not  yet  got  call  for  32  per  cent  (more  than  double 
our  existing  business),  and  the  steam-railroad  consumption 
would  amount  to  16  per  cent.  You  will  notice  that  the  steam- 
railroad  consumption  is  the  smallest  with  the  exception  of  the 
present  electric-light-and-power  business. 

I  was  discussing  this  subject  with  one  of  my  friends  this 
evening,  rehearsing  on  him  a  little,  and  he  said:  "You  cannot 
get  all  that.  Conditions  are  such  that  you  have  been  able  to 
get  part  of  it  in  Chicago."  The  fact  is  that  in  the  course  of 
some  three  years  we  have  been  able  to  sell  a  great  amount  of 
energy  —  I  am  talking  kilowatt-hours,  not  dollars  and  cents  — 
to  the  street  railways  and  the  elevated  railways,  notwithstand- 
ing the  fact  that  the  franchise-ordinance  condition  of  the 
surface  street  railways  of  the  city  of  Chicago  are  such  that 
they  are  able  to  raise  their  money  on  a  better  basis  than  any 
public-service  corporation  in  this  country,  with  probably  the 
exception  of  three.  It  was  no  case  of  their  needing  our  assist- 
ance to  finance  them;  they  have  practically  the  credit  of  the 
City  of  Chicago,  whose  credit  must  necessarily  be  high,  be- 
cause the  debt  of  the  municipality  is  lower,  probably,  than  that 
of  any  city  of  its  size  in  the  world,  in  proportion  to  population. 
The  street-railway  companies  have  practically  the  credit  of 
the  city  pledged  behind  them;  their  financial  arrangements 
are  made  with  the  leading  bankers  of  the  country;  and  it  is 
much  easier  for  them  to  raise  money  in  amounts  of  $10,000,000 
and  $20,000,000  than  it  is  for  any  of  us  in  this  room  to  raise 
it  in  single  millions.  It  was  no  case  of  necessity.  It  was  a 
case  of  demonstrating  that  it  was  the  best  thing  for  the  railway 
companies  to  do;  that  it  was  the  best  thing  for  us  to  do,  and, 


LARGER  ASPECTS 


77 


perhaps,  of  taking  some  chances  as  to  what  the  outcome  would 
be.  We  naturally  had  to  theorize  on  it  at  the  start.  We 
knew  little  or  nothing  of  what  the  results  would  be;  it  was  purely 
an  experiment  on  our  part.  The  impression  has  gone  out 
among  some  of  our  friends  that  we  were  able  to  take  advantage 
of  a  peculiar  situation,  so  far  as  finances  were  concerned;  but  that 
impression  is  entirely  an  erroneous  one;  and  I  want  to  get  that 
out  of  your  minds  before  going  ahead  with  any  further  ex- 
planation. 

ANALYZING  THE  COST  OF  PRODUCTION 

Let  us  consider  the  cost  of  production.  Fig.  1  represents 
the  cost  of  supply,  divided,  as  you  see,  into  three  parts  —  oper- 
ating charges,  fixed  charges  and  the  total  of  the  two.  You 
will  note  also  that  different  symbols  are  used  in  the  diagram 
to  indicate  the  cost  of  supplying  the  street  railways,  the  average 
residence  using  carbon  lamps  and  the  average  residence  using 
tungsten  lamps.  Energy  sold  to  street  railways  is  delivered 
at  the  substation.  We  have  practically  a  single  cable,  or  in 
some  cases  two  cables,  to  each  substation.  The  metering  is 


Fig.  1. 


°r2  2l_  £t5   eg     SSS  S8S  888  £88       X     8 
Analysis  of  the  Cost  of  Producing  Electric  Service 


78  ADDRESSES  OF  SAMUEL  INSULL 

done  at  our  switchboard.  The  amount  of  electricity  we  sell 
to  street  railways,  230,000,000  kilowatt-hours,  is  divided,  I 
think,  among  six  or  eight  customers.  Necessarily,  the  cost  of 
production  runs  up  pretty  high.  Column  1  of  Fig.  1  represents 
the  energy  supplied  to  the  street  rail  ways.  Column  2  represents 
the  production  cost  of  the  average  residence  lighting  using  car- 
bon lamps  and  column  3  represents  the  average  residence  light- 
ing using  tungsten  lamps.  The  difference  in  cost  of  production 
is  not  great.  I  mean  now  the  difference  in  the  cost  of  the  en- 
ergy generated  at  the  station,  based  on  metering  at  the  switch- 
board; but  when  you  come  to  the  distribution  expenses,  you 
will  notice  that  column  4  is  so  small  that  it  can  hardly  be  seen. 
Column  4  represents  the  distribution  cost  of  the  street-railway 
business.  So  columns  5  and  6  represent,  respectively,  the 
distribution  cost  of  the  average  residence  using  carbon  lamps 
and  the  average  residence  using  the  tungsten  lamp.  The  same 
remarks,  you  will  note,  apply  to  management  and  supervision, 
(columns  7,  8  and  9)  and  the  same,  necessarily,  to  municipal 
compensation  (columns  10,  11  and  12). 

When  we  come  to  metering,  the  cost  of  metering  the  railway 
business  (column  13)  is  but  little  more  than  the  cost  of  dis- 
tribution (column  4),  whereas,  by  contrast,  the  cost  of  metering 
the  ordinary  residence  runs  up  as  shown  by  column  14  and  the 
cost  of  metering  residences  that  use  the  tungsten  lamp  runs 
still  greater,  as  indicated  by  column  15.  The  comparison  in 
the  loss  from  "generated"  to  "sold"  is  shown  by  columns  16, 
17  and  18.  This  loss  is  practically  nothing  in  the  case  of  the 
street  railways,  because  our  energy  is  sold  at  our  own  switch- 
board, and  the  loss  in  the  other  two  cases  must  be  precisely 
the  same. 

Consider  now  what  is  the  biggest  item,  what  is  usually 
the  biggest  item,  of  our  expense.  You  will  notice  that  our 
fixed  charges  —  that  is,  interest,  depreciation,  insurance  and 
taxes  —  are  a  little  less  (column  19)  than  our  cost  of  production 
(column  1),  in  the  case  of  the  street  railways,  and  very  consider- 
ably more  (columns  20  and  21  compared  with  columns  2  and  3) 
in  the  case  of  residence  customers.  In  distribution,  the  fixed 


LARGER  ASPECTS  79 

charges  (columns  23  and  24)  are  very  heavy  indeed  in  the  case 
of  residence  lighting  and  very  low  in  the  case  of  the  street 
railways  (column  22).  So  this  goes  on  all  the  way  through, 
until  you  put  the  two  together.  Column  34  represents  the 
total  cost,  fixed  charges  and  operating  charges,  for  the  street- 
railway  business.  Column  35  represents  the  total  cost  of  the 
ordinary  customer  using  carbon  lamps,  with  a  load  factor  of 
about  33  per  cent,  and  column  36  represents  the  total  cost  of 
the  user  of  tungsten  lamps.  If  you  will  bear  this  graphic 
comparison  hi  mind,  the  enormous  difference  in  cost  between 
column  34  and  either  column  35  or  36,  it  will  be  apparent  to  you 
that  our  selling  price  is  not  really  as  low  as  it  appears.  We 
sell  our  electricity  to  railways  on  a  basis  of  $15  per  maximum 
kilowatt  per  year,  figured  on  an  average  of  morning  and  eve- 
ning power  maxima.  In  addition,  in  the  case  of  a  company 
where  we  get,  say,  from  5,000  to  10,000  kilowatts,  we  charge 
0.5  of  a  cent  per  kilowatt-hour,  and  in  the  case  of  a  company 
where  we  get  30,000  kilowatts  or  over,  we  charge  0.4  of  a  cent. 

LOAD  FACTORS  OF  RAILWAY  CUSTOMERS 

The  curves  of  Fig.  2  represent  the  cost  of  electricity  to  a 
railway  company  under  different  conditions  of  load  factor. 
We  adopted  a  rule,  in  selling  to  the  railway  companies,  that 
we  would  not  take  any  business  unless  we  got  a  guarantee  of 
35  per  cent  load  factor;  that  is,  that  the  average  use  should  be 
equal  to  35  per  cent  of  the  maximum.  Our  reason  for  adopting 
that  rule  was  that  we  came  to  the  conclusion  that  the  average 
load  factor  of  an  electric-lighting  company  was  somewhere 
around  30  per  cent.  Some  companies  show  figures  a  little 
above  that  and  some  of  them  a  little  below,  partly  owing  to 
local  conditions,  but  more  largely  owing  to  the  ability  with 
which  the  product  is  sold.  We  made  up  our  minds,  in  trying 
the  experiment,  that  we  did  not  care  to  take  any  business  that 
would  interfere  with  our  load  factor.  We  wanted  it  improved 
in  any  event.  We  used  to  talk  very  glibly  at  that  time  about 
the  diversity  factor,  but  we,  of  course,  knew  absolutely  nothing 


80 


ADDRESSES  OF  SAMUEL  INSULL 


about  it,  as  we  had  no  experience  in  selling  large  volumes  of  en- 
ergy to  a  few  customers. 

When  we  were  "up  against"  the  proposition  of  taking  the 
entire  business  of  a  railway  company,  as  we  have  been  in  the 
case  of  the  Chicago  City  Railway  Company,  we  came  to  the 
conclusion  in  that  case  we  had  to  take  the  risk  of  their  business, 
and  we  had  to  take  whatever  load  factor  the  business  gave.  We 


50  60 

LOAD  TACTOR8 


Fig.  2 

had  some  confidence  in  taking  that  risk,  because  we  knew  if 
we  had  their  entire  business,  from  the  experience  we  had  in 
dealing  with  part  of  the  business,  the  load  factor  would  be 
better  than  35  per  cent,  and  the  tendency  would  be  to  improve 
the  general  load  factor. 

In  actual  experience  we  found  that  selling  the  Chicago  City 
Railway  Company,  doing  practically  all  of  their  business,  and 
in  dealing  with  them  for  a  year  and  selling  them  27,740  kilo- 
watts of  maximum  demand,  the  load  factor  was  48.7,  and  that 
they  paid  us  a  rate  of  0.77  cent  per  kilowatt-hour  for  the  energy 
delivered  at  our  switchboard,  we  standing  the  cost  of  produc- 
tion and  the  investment  in  the  cable  for  transmitting  the 
energy  to  their  substation.  We  also  found  there  was  far  more 


LARGER  ASPECTS  81 

profit  for  us  in  business  at  that  price  than  there  was  in  busi- 
ness at  a  much  poorer  load  factor  at  1  cent  or  1.25  cents  per 
kilowatt-hour. 


APPARENTLY  Low  RATES  MAY  MEAN  GOOD  BUSINESS 

Our  experience  with  the  Chicago  Railways  Company,  which 
for  the  last  year  has  paid  0.5  cent  for  the  secondary  charge,  in- 
stead of  0.4  cent,  was  that  in  selling  it  15,820  kilowatts  of 
maximum  demand  we  got  42.6  load  factor  at  an  average  price 
of  0.9  cent  per  kilowatt-hour. 

Those  figures  may  seem  somewhat  appalling  to  some  of  you 
who  are  selling  your  product  in  small  quantities,  either  as  direct 
current  or  as  alternating  current.  When  I  speak  of  small 
quantities,  I  am  speaking  relatively;  I  mean  to  power  customers 
using,  say,  100  or  200  kilowatts.  But  I  am  sure  there  are  a 
number  of  gentlemen  in  this  room  who  would  not  hesitate  to 
take  a  contract  that  would  yield  them  $10,000,  $15,000,  $20,- 
000,  or  $30,000  a  year,  dependent  on  the  size  of  the  town 
largely,  and  whether  the  system  was  underground  or  overhead, 
quoting  a  price  from  2.5  up  to  3  cents  per  kilowatt-hour  for 
energy  delivered  to  the  customer.  If  you  will  take  our  rates 
and  figure  on  the  generation  of  electricity  and  the  delivery  of 
it  to  the  customer's  side  of  the  meter,  you  will  find  that  the 
rate  of  $15  per  kilowatt  of  maximum  demand  a  year,  plus 
0.5  of  a  cent  per  kilowatt-hour,  without  the  large  amount  of 
investment  you  have  to  make  to  take  care  of  your  average 
industrial  customer  —  you  will  find  that  that  business,  which 
we  take  at  that  apparently  low  rate,  is  really  better  business 
than  you  take  when  you  quote  a  manufacturer,  say,  2.25  or 
2.5  cents  per  kilowatt-hour.  For  one  thing,  our  load  factor  is 
almost  twice  as  good  as  that  of  the  average  manufacturer.  He 
will  tell  you  that  he  is  running  twelve  hours  a  day  and  uses 
power  all  the  time;  but  when  you  get  right  down  to  it  you  will 
find  his  load  factor  somewhere  about  20  per  cent.  I  know  that 
any  of  you  who  have  figured  on  that  subject  will  bear  me  out 
in  what  I  say. 


ADDRESSES  OF  SAMUEL  INSULL 


THE  EFFECT  OF  TAKING  STREET-RAILWAY  BUSINESS 

I  will  leave  the  question  of  cost  and  selling  price  for  a  few 
minutes,  and  show  you  some  of  the  effect  that  this  class  of 
business  has  had  upon  our  load  curves.  Take,  for  instance, 
the  bearing  of  the  monthly  load  factor  on  your  cost  of  station 
production.  Fig.  3  gives  an  example  of  that.  You  will  see 
the  load-factor  curve  of  our  light-and-power  business,  with  the 
variation,  month  by  month.  The  New  York  Edison  curve 


/x 


LIGHT,    .0-^ 


^7 


MONTHLY 

LOAD  FACTORS 

1008-1909 


^>< 


T«       OCT..        NOV.        DEC. 


FEB          MAR.       APR. 


Fig.  3 


is  shown,  also  our  street-railway  curve,  and  the  light-and-power 
and  street-railway  business  of  Chicago  combined.  You  will 
see  what  an  important  bearing  that  must  have  necessarily  on 
our  cost  month  by  month,  as  the  combination  of  our  business 
and  the  street-railway  business  produces  a  result  in  our  monthly 
load  factor  which  is  very  gratifying  to  us.  Take,  for  instance, 
the  low  point.  Our  light-and-power  load  factor  in  November 
by  itself  would  be  36,  and  yet  when  combined  with  the  street- 
railway  business  it  goes  to  over  44.  The  same  result  is  shown 
in  the  effect  upon  our  annual  load  factor. 

I  started  some  six  years  ago,  I  think,  to  take  the  first  busi- 


LARGER  ASPECTS  83 

ness  of  this  character.  I  think  my  negotiations  started  some 
time  in  1902  or  1903.  In  1899  our  load  factor,  when  we  did 
nothing  except  the  ordinary  line  of  business,  was  a  little  over 
28.  Referring  now  to  Fig.  4,  you  will  notice  that  the  annual 
load  factor  of  our  light-and-power  business  stood  even  for  some 
time.  Then  we  began  to  take  advantage  of  the  experience  we 
had  with  starting  the  railway  business;  we  began  to  take 
courage,  and  we  started  to  lower  our  rate  in  the  industrial- 
power  business.  Thus  our  load  factor  for  light  and  power  alone 


1904         1905        1906 

YEARS  ENDING  JUNE  3O 


Fig.  4 

gradually  crept  up  until  it  was  about  33.  What  has  been  the 
effect  of  our  taking  the  street-railway  business?  It  has  been  a 
steady  climb  up  to  1908.  It  went  down  a  little  in  1909  owing 
to  temporary  reasons,  but  we  are  still  above  40  per  cent.  The 
comparison  there  is  practically  the  difference  between  30  per 
cent  and  40  per  cent.  Now,  what  does  that  mean,  gentlemen? 
Suppose  you  have,  as  we  have,  fixed  charges  on  about 
$50,000,000  of  investment.  Take  interest  and  depreciation, 
10  per  cent,  that  is  $5,000,000.  Suppose  that  our  business  was 
confined  entirely  to  the  ordinary  lighting-and-power  business, 
outside  of  the  railway  business.  That  $5,000,000  in  interest 


84  ADDRESSES  OF  SAMUEL  INSULL 

and  depreciation  would  have  to  be  spread  over  a  business  where 
the  average  use  of  your  investment  is  only  30  per  cent  of  the 
time,  practically.  What  is  our  present  situation?  Our  in- 
terest and  depreciation  are  spread  over  40  per  cent,  rather  than 
30  per  cent,  a  difference  of  10  per  cent.  But,  you  may  say,  that 
is  only  10  per  cent.  But  what  does  it  really  mean?  It  means 
that  the  divisor  is  one-third  more  and  the  reduction  in  fixed 
charges  and  depreciation  in  proportion  to  the  dollars  invested 
is  proportionately  less. 

NOT  MERELY  A  QUESTION  OF  LOCAL  CONDITIONS 

That  is  a  result  that  you  can  all  obtain.  It  is  not  any 
question  of  local  conditions.  If  it  is  impossible  for  you  to 
obtain  it;  if  you  cannot  get  the  total  generation  of  electricity 
in  the  community  in  which  you  live,  or  so  shape  your  policy 
that  that  is  eventually  where  you  will  come  out,  the  wisest 
thing  that  you  can  do,  if  you  have  your  own  money  invested 
in  the  business,  is  to  sell  out  to  the  fellow  who  is  the  larger 
producer  of  electricity  in  your  community;  just  the  same  as  if 
you  were  a  small  manufacturer,  if  you  could  get  a  satisfactory 
price,  you  would  be  anxious  to  sell  out  to  the  big  concern 
which  did  90  per  cent  of  the  business.  It  is  inevitable,  if  you 
take  the  street  railways  alone  in  any  community,  that  they  will 
be  by  far  the  larger  producers  of  electricity,  unless  you  can  get 
the  job  of  producing  their  product,  because  unless  you  can  get 
that  job,  it  is  an  impossibility  for  you  so  to  arrange  your  cost  of 
production  on  a  sufficiently  low  basis  for  you  to  quote  a  price 
for  the  industrial-power  business  in  your  community  that  will 
really  give  you  the  business.  To  my  mind  there  is  no  question 
about  that;  it  is  a  gospel  I  have  been  preaching  to  my  board 
of  directors  for  some  ten  years  past.  I  have  taken  the  ground 
that  we  have  got  to  be  the  main  producers  of  electrical  energy 
in  our  community,  or  else  the  other  fellow  has  got  to  own  us. 

I  think  I  can  give  you  an  example  of  that  situation  which 
occurred  in  the  city  of  New  York  a  number  of  years  ago. 
What  was  known  as  the  "Whitney  Syndicate"  acquired  all 


LARGER  ASPECTS  85 

the  street  railways  of  that  city.  The  old  Edison  Electric  Illum- 
inating Company  of  New  York  had  been  well  handled  and  had  a 
fine  business,  but  when  the  Whitney  syndicate  acquired  the 
street  railways  the  people  back  of  it  gave  out  the  information 
that  they  were  going  into  the  electric-lighting  business,  and 
the  best  bankers  in  this  country  came  to  terms  very  quickly 
and  sold  the  Edison  Electric  Illuminating  Company  of  New 
York.  They  did  not  know  exactly  then  that  this  would  be 
done;  they  were  only  scared;  but  the  fact  was  that  if  the  Metro- 
politan Street  Railway  Company,  as  then  threatened,  had 
gone  into  the  electric-light-and-power  business,  it  would  have 
been  but  a  few  years  before  it  would  have  been  able  to  sell 
electricity  on  a  much  lower  basis  than  the  Edison  Electric 
Illuminating  Company,  because  it  would  have  had  the  con- 
ditions, as  I  will  show  you  a  little  later,  that  go  to  make  low 
cost  of  production,  and  consequently  low  selling  price.  The 
old  Edison  Electric  Illuminating  Company  of  New  York  had 
not  that  condition  and  could  not  possibly  have  it.  Financial 
conditions  have  changed  the  situation  somewhat,  so  that  the 
New  York  Edison  Company  has  no  reason  to  be  afraid  at  the 
moment. 

I  want  you  to  understand  that  to  my  mind  it  was  a  case 
of  absolute  necessity  that  we  should  dominate  the  energy- 
production  situation  in  Chicago.  We  have  not  got  there  yet, 
but  we  are  getting  there  gradually. 

THE  DIVERSITY  FACTOR 

Now,  I  will  turn  to  another  side  of  the  subject.  I  am  not 
an  engineer,  and  I  cannot  talk  technical  terms  as  some  of  you 
people  can,  so  if  I  slip  up  in  discussing  such  a  term  as  *'  diver- 
sity factor"  you  will  have  to  excuse  me.  Fig.  5  shows  the 
actual  conditions,  so  far  as  the  light-and-power  business  and  the 
street-railway  business  we  do  in  Chicago  is  concerned.  We 
have  estimated  the  steam-railroad  consumption,  partly  on 
experience  that  we  have  been  able  to  obtain  from  the  New  York 
Central  Railroad  and  other  railroads,  and  partly  by  taking  the 


86 


ADDRESSES  OF  SAMUEL  INSULL 


S11VMO1IM 


If* 

I'M 

||  • 

IS 

§5   5 
III 

ill 

Hi 

I       0       "• 

s  »  s 

if  9 

-  s 

5  1  | 

STEAM  RAILROADS 
15  MINUTE  MAXIMUM 
LOAOi  FACTOR  413.4% 

STREET  RAILWAYS 
INDICATING  MAXIMUM 
LOAD  FACTOR.  49.3% 

111 

log 
•*  £   o 

»  1 
5 


LARGER  ASPECTS 


87 


Interstate  Commerce  Commission's  statistics  of  income  and 
working  out  the  probable  consumption  of  electrical  energy  from 
the  income  basis.  Of  course,  all  we  have  to  do,  so  far  as  pro- 
viding the  investment  is  concerned — and  as  you  noted  in  Fig.  1 
the  largest  items  we  have  are  investment  expenses  —  is  to 
provide  the  necessary  plant  to  take  care  of  the  maximum  load 
that  we  may  have  at  any  one  time  during  the  year.  Fig.  5 
represents,  among  other  things,  our  load  at  the  time  of  our 
total-output  maximum  for  the  year.  The  column  on  the  right 
represents  the  coincident  maxima  of  different  systems.  The 
column  on  the  left  represents  the  non-coincident  maxima  of  the 
different  systems.  What  we  have  to  provide  money  for,  and 
therefore  the  item  that,  when  you  get  down  to  it,  comes  into 
the  question  when  we  are  figuring  our  cost,  is  the  situation 
shown  by  the  column  in  the  center.  You  will  notice  there  we 
have  a  load  factor  of  43  per  cent.  The  non-coincident  maxima 
of  the  people  that  we  serve,  assuming  that  we  are  serving  steam 
railroads,  show  a  total  maximum  of  25.8  per  cent  greater  than 
the  maximum  we  would  have  at  the  period  of  our  maximum 
load.1 

Conditions  under  which  we  actually  sold  energy  to  railways 
are  shown  in  Fig.  6.  We  have  no  steam-railroad  customers, 
and  Fig.  5  gives  an  assumption  based  on  our  expectation  of 
getting  some  in  future.  Fig.  6  shows  conditions  under  which  we 
actually  supply.  The  highest  coincident  maxima  of  the  street 
railways  occurred  on  the  15th  of  February.  Taking  the 
highest  maxima  for  each  of  the  separate  companies,  they  came 

1.  In  the  original  chart  the  following  information  was  given  in  tabular 
form: 


Steam 
Railways 

Street 
Railways 

Light 
and  Power 

Total 

Non-coincident  Maximum  Kilowatts  . 
Kilowatts  at  Time  of  Total-Output 
Maximum  

69,300 
53,900 

68,650 
53,300 

68,310 
56,800 

206,260 
164,000 

Difference  
Percentage  of  Difference 

15,400 
28.6 

15,350 
28.8 

11,510 
20.3 

42,260 
25.8 

Coincident  Maximum  Kilowatts  
Kilowatts  of  Time  of  Total-Output 

63,000 
53900 

60,010 
53300 

64,950 
56800 

187,960 
164  000 

9  100 

6  710 

8  150 

23  960 

Percentage  of  Difference 

16.9 

12.6 

14.3 

14.6 

88 


ADDRESSES  OF  SAMUEL  INSULL 


S11VMO1IM 


a 

< 


li! 


lie     ! 

|Ild? 


gjfbP-- 

ii2 

i 


i 

(0 

1 

!i:« 

"z 

I 

1    1 

j 
s    I 

5i    ^ 

£ 

1    I 

I     8 

«i 

1 

§ 

1 

a 

0 

Li 

e 

1 

ha 

ft 

I  3 

ETROPOLITAN" 

FEB.  6 

"z 

g  « 
1  a 

1  i  = 

i    ,    . 

9 

z 

° 

i 

1 


LARGER  ASPECTS  89 

this  way:  On  February  13  we  had  the  maximum  of  the  North 
Shore  Electric  Company,  that  is  a  lighting  or  electric-service 
company.  The  maximum  of  the  Oak  Park  "L"  Company 
came  on  February  1;  that  of  Metropolitan  "L"  on  February  6, 
the  Northwestern  "L"  on  February  16,  the  Chicago  Railways 
Company  on  February  15,  and  the  Chicago  City  Railway  Com- 
pany on  February  24.  You  see  how  the  diversity  factor  helps 
us  out  there.  Of  course,  if  all  these  concerns  were  in  one 
company  the  situation  would  be  different,  but  taking  it  as  the 


90,000 


80,000 


Fig.  7 


business  exists  in  Chicago,  you  will  note  that  not  any  two  of 
them  came  on  the  same  day.  The  maximum  railway  load  of 
the  year  was  on  February  15,  on  the  day  that  the  Chicago 
Railways  Company's  maximum  came,  not,  as  you  would 
naturally  expect,  on  February  24,  the  date  of  the  maximum  of 
the  Chicago  City  Railway  Company,  our  largest  railway 
customer. 

We  sell  to  the  railway  companies  on  the  basis  of  the  average 
maxima  for  the  three  highest  days,  or  consecutive  highest  days 
of  the  year,  counting  the  two  maxima  of  the  day,  namely, 
the  morning  maximum  and  the  evening  maximum.  The  re- 


90  ADDRESSES  OF  SAMUEL  INSULL 

suit  is  that  we  were  paid  for  about  16  per  cent  less  than  they 
actually  took  on  an  indicated  maximum;  that  is,  on  a  swing 
maximum.  That  is  a  very  important  thing  in  figuring  out 
this  contract,  because  I  have  never  yet  struck  a  railway  engineer 
who  figured  it  in  at  all,  or  pointed  it  out  to  me.  We  always 
figured  the  price  16  per  cent  or  17  per  cent  higher  than  it 
actually  was. 

The  third  column  of  Fig.  6  represents  the  maxima  charged 
for,  and  the  fourth  column  represents  the  non-coincident  in- 
dicating maxima  for  the  year;  that  is,  the  swing  maxima  for 
the  year.  The  difference  between  the  two  is  17.5  per  cent 
of  the  coincident  indicating  maximum.  The  difference  be- 
tween the  non-coincident  indicating  maxima  in  February,  1909, 
and  the  highest  coincident  indicating  maxima  (on  February  15, 
1909)  was  6.5  per  cent.1 

COST  OF  PRODUCING  ENERGY  FOR  RAILROADS 

A  rather  interesting  diagram  is  that  of  Fig.  7,  showing  the 
variation  in  maxima  for  the  different  hours  of  the  day.  Our 
light-and-power  business  and  our  street-railway  business  are 
shown.  The  steam-railroad  load  curve  is  that  of  the  New  York 
Central  and  is  added  so  that  we  may  see  the  effects  of  combina- 
tion. The  figures  are  those  of  a  winter  day. 

I  will  leave  our  figures  for  a  few  moments  and  show  you 

1.  The  following  table  was  a  part  of  the  original  chart  of  Fig.  6: 

(The  figures  represent  kilowatts) 

Non- 

Non-  Coincident     Coincident 

Maximum      Coincident      Indicated       Indicated 
Charged    1  Hr.  Maxima        Max.  Max. 

for  Feb.,  1909    Feb.  15, 1909    Feb.,  1909 

Illinois  Tunnel  Co 970  1,105  800  1,080 

North  Shore  Electric  Co 1,570  1,770  1,800  2,600 

Oak  Park  "L"...,  4,520  4,900  4,000  4,800 

Metropolitan  "L" 3,490  4,350  3,500  4,100 

Northwestern  "L" 4,317  4,530  5,000  5,400 

Total  Elevated 12,327  13,780  12,500  ,14,300 

Chicago  Railways  Co 15,820  17,060  17,900  17,900 

Chicago  City  Railway  Co 27,744  27,960  27,000  28,000 

Total  Surface  Lines..          43,564  45,020  44,900  45,900 

GRAND  TOTAL 58,431  61,675 


LARGER  ASPECTS  91 

what  has  been  done  by  some  of  the  steam  railroads.  The  New 
York  Central  has  an  investment  of  about  $6,000,000  in  power 
stations  and  cables  and  conduits.  I  asked  for  the  figures  that 
way,  because  in  selling  to  the  railway  companies,  while  we 
meter  the  energy  at  our  generating  station,  we  provide  the 
cable  and  conduits  for  conveying  the  electricity  to  the  railway 
substations;  that  is,  the  street-railway  substations.  Figuring 
a  fixed  charge  of  12  per  cent,  which  is  not  unreasonable  (that 
would  be  5  per  cent  for  money,  5  per  cent  for  depreciation,  and 
2  per  cent  to  cover  insurance  and  taxes),  would  make  a  charge 
of  $720,000  a  year  before  ever  turning  a  wheel.  That  is,  be- 
fore they  attempt  to  produce  any  electricity  it  costs  them  $720,- 

000  a  year. 

The  New  York  Central  has  a  reasonably  low  cost  of  produc- 
tion; incidentally  it  is  more  than  50  per  cent  greater  than  our 
secondary  rate  to  the  Chicago  City  Railway  Company. 

I  have  been  somewhat  embarrassed  in  preparing  some  of 
these  diagrams,  especially  Fig.  1,  as  I  did  not  want  to  show  my 
costs;1  but  I  assure  you  that  we  sell  electricity  on  the  basis  of 
so  much  to  cover  our  fixed  charges  and  so  much  as  a  selling 
price  per  kilowatt-hour.  If  we  quote  0.4  cent  per  kilowatt- 
hour  we  do  not  expect  to  quote  a  price  that  is  lower  than  our 
cost.  The  New  York  Central  people's  maxima  were  based 
on  what  they  would  have  to  pay  us,  not  based  on  their  in- 
dicators; their  indicators  show  15,000  kilowatts.  Incidentally 

1  may  remark  that  they  have  one  station  that  has  not  turned  a 
wheel  in  two  years.     Their  maximum  load,  based  on  what  they 

1.  This  frank  statement  is  very  interesting.  As  a  matter  of  fact,  publica- 
tion of  the  Briarcliff  speech  was  suppressed  at  the  time  of  the  convention,  and 
this  is  its  first  appearance  in  print.  After  the  address  had  been  delivered  the 
shorthand  reporter's  notes  and  transcript  were  turned  over  to  Mr.  Insull, 
and  the  speech  was  not  even  published  in  the  official  Proceedings  of  the  Asso- 
ciation of  Edison  Illuminating  Companies,  although  this  book  is  circulated  only 
among  members  of  the  association.  The  official  report  contained  this  state- 
ment: "Mr.  Insull  then  delivered  his  address,  which,  at  his  request,  has  been 
omitted  from  the  minutes."  Several  years  later  the  author  of  the  address  was 
asked  why  this  action  was  taken,  and  he  answered  as  follows:  "At  that  time  I 
thought  that  the  charts,  figures  and  data  used  were  of  such  a  confidential  na- 
ture that  it  was  questionable  whether  even  a  private  publication  should  be 
made.  I  had  not  then  arrived  at  the  conclusion,  as  I  did  later,  that  the  best 
way  to  operate  this  business  is  to  take  the  public  into  one's  confidence." 


92  ADDRESSES  OF  SAMUEL  INSULL 

would  have  to  pay  us,  would  be  12,700  kilowatts;  that  is, 
allowing  a  17.5  per  cent  difference.  Their  kilowatt-hours 
generated  were  44,000,000  and  their  cost  was  around  0.6  cent; 
consequently  their  operating  cost  was  somewhere  around 
$275,000.  If  you  take  the  total  fixed  charges  of  12  per  cent 
and  add  their  cost  of  production,  it  shows  a  total  cost  of  $995,- 
000  a  year. 

The  Pennsylvania  Railroad  people  did  a  little  differently. 
They  employed  a  firm  of  consulting  engineers  who  put  up  a 
plant  for  them  at  a  cost  of  $3,500,000.  I  do  not  know  whether 
these  figures  include  cables  and  conduits;  I  assume  that  they  do. 
On  the  same  basis  of  12  per  cent,  they  have  a  fixed  charge  of 
$420,000.  Their  maximum  kilowatts  happen  to  be  the  same, 
so  on  our  basis  of  figuring  we  would  reduce  the  15,000  kilowatts 
to  12,700  kilowatts.  The  kilowatt-hours  generated  were  30,- 
000,000.  This  company's  operating  cost  is  higher  than  that  of 
the  New  York  Central. 

There  is  one  thing  I  should  say,  and  that  is  that  the  difference 
in  the  price  of  fuel  between  the  East  and  West  should  make  a 
substantial  difference  in  the  cost  of  electrical  energy  —  how 
much  I  do  not  know,  so  I  simply  had  to  make  a  comparison 
based  on  our  present  contract  with  the  street  railways. 

The  total  operating  and  fixed  charges  of  the  Pennsylvania 
Railroad  were  $630,000,  on  my  basis  of  figuring,  but  if  you 
combine  the  two  railroads  the  figure  is  $1,625,000.  Now,  that 
is  the  annual  electrical-energy  expenditure  of  the  two  greatest 
railroad  corporations,  probably,  this  side  of  the  Missouri  River. 
If  they  had  bought  energy  at  $15  a  kilowatt  of  maximum  de- 
mand and  0.4  cent  per  kilowatt-hour,  their  total  combined 
expenditure  would  have  been  $677,000,  or  a  saving  of  $948,000 
a  year. 

A  VERY  SATISFACTORY  CLASS  OF  BUSINESS 

That  statement  is  not  entirely  fair.  The  New  York  Central 
Railroad  will  eventually,  no  doubt,  be  able  to  use  its  entire 
generating  plant.  But  who  in  this  room  would  ever  think  of 
building  a  generating  plant  and  having  it  stand  absolutely 


LARGER  ASPECTS  93 

finished  and  idle  for  two  years  after  the  contractors  left  the 
work?  That  is  what  results  from  people  going  into  a  line  of 
business  which  they  do  not  understand.  Similar  cases  may  be 
found  in  other  parts  of  the  United  States,  and  the  mistake  will 
be  repeated  again  and  again  by  the  steam-railroad  companies 
unless  you  people  in  this  room  put  your  shoulder  to  the  wheel. 
If  you  have  not  economical  plants,  provide  the  capital  to  put 
them  up,  and  cater  for  this  class  of  business,  which  in  my 
judgment,  is  lying  right  at  your  feet.  It  is  perhaps  the  most 
satisfactory  business  you  can  get.  You  deal  with  very  few 
customers.  I  think  at  the  present  time  we  have  $2,500,000  a 
year  of  it  on  our  books.  In  all  we  will  get  $20,000,000  or  more, 
taking  the  average  life  of  the  contracts.  You  collect  your 
money  every  month  without  any  question.  It  is  the  cheapest 
revenue  for  you  to  collect.  You  can  turn  your  capital  quicker 
than  you  can  in  any  other  branch  of  your  business.  And  it  is 
easier  to  give  the  utilities  satisfaction  than  the  man  who  takes 
two  or  three  lamps  in  an  apartment.  In  addition,  you  are  in 
a  large  way  of  business,  producing  your  supply  on  a  scale  of 
some  magnitude;  you  are  manufacturing  something  that 
amounts  to  something.  You  are  starting  to  get  yourselves  in 
a  position  where  you  can  afford  to  run  your  entire  small-cus- 
tomer business  at  a  loss,  and,  gentlemen,  you  have  got  to  do 
that  eventually,  if  you  expect  to  remain  in  the  business. 

Just  dwell  for  a  minute  on  these  figures  of  the  Pennsylvania 
and  New  York  Central  railroads.  Look  at  it  from  our  point  of 
view.  We  are  all  of  us  interested  in  the  general  use  of  electrical 
energy  for  all  classes  of  transportation.  We  hope,  if  we  cannot 
get  the  big  amount  of  business,  that  we  can  catch  on  to  the 
outskirts  and  get  a  little  of  it.  Just  fancy  this  business  being 
handicapped  with  a  fixed  charge  in  the  experimenting  days  of 
the  business,  amounting  to  interest  at  5  per  cent  on  $19,000,- 
000,  or  an  amount  large  enough,  probably,  to  bring  another 
great  trunk  line  into  the  city  of  New  York. 

I  almost  took  a  man's  breath  away  yesterday  when  I  told 
him  that  our  average  income  from  one  of  these  large  railway 
companies  was  0.75  cent  a  kilowatt-hour  last  year.  But 


94  ADDRESSES  OF  SAMUEL  INSULL 

there  is  more  money  in  selling  that  railway  company  at  that 
price  than  there  is  in  selling  some  little  customer  at  10,  12,  or 
15  cents  a  kilowatt-hour.  Take  column  36  of  Fig.  1;  that 
demonstrates  the  fact.  If  the  actual  figures  were  on  there, 
you  would  find  that  the  cost  of  supplying  the  average  residence 
that  uses  tungsten  lamps  is  so  near  the  selling  price  that  the 
difference  is  hardly  worth  talking  about. 

In  a  way  I  am  not  disinterested;  I  am  talking  to  you  with  a 
motive.  I  am  trying  to  get  this  class  of  business  in  Chicago. 
I  will  go  anywhere  in  the  United  States  to  help  any  of  you  get 
the  same  class  of  business  in  large  units,  because  the  more 
that  class  of  business  is  canvassed  for  and  is  obtained,  the 
easier  it  will  be  for  me  to  build  up  the  control  of  the  manufac- 
ture of  electrical  energy  in  the  community  in  which  I  live. 
That  is  the  interested  point  of  view  from  which  I  am  talking. 

A  COLLOQUY  WITH  A  PUBLIC-SERVICE  COMMISSIONER 

A  gentleman  came  into  my  office  the  other  day,  connected 
with  the  Public  Service  Commission  of  New  York  —  I  forget 
whether  it  was  the  First  or  Second  District  —  who  is  very 
much  interested  in  the  railway  proposition.  He  was  sent  to  me 
by  Mr.  Mitten,1  the  president  of  the  Chicago  City  Railway 
Company,  a  man  to  whom  I  owe  a  very  great  deal  for  co-oper- 
ating with  me,  laying  all  his  cards  on  the  table  and  showing 
his  costs  absolutely  openly.  Mr.  Mitten  negotiated  with  me 
on  the  broad  Uasis  that  he  did  not  want  to  produce  energy,  and 
that  I  ought  to  produce  it.  On  the  other  hand,  I  did  not  want 
to  sell  it  to  him  unless  I  could  make  him  a  proposition  which  it 
would  pay  him  to  accept,  and  that  meant,  of  course,  a  proposi- 
tion which  would  be  certainly  as  low  as  his  costs.  This  visitor 
of  whom  I  started  to  speak  wanted  some  information  on  the 
purchase  of  electricity  by  the  railway  company.  When  he 
came  I  had  some  of  the  preliminary  charts,  which  I  have  showed 
you  this  evening,  lying  around,  and  I  showed  him  what  the  idea 

1.  Mr.  T.  E.  Mitten,  now  (1915)  chairman  of  the  executive  committee 
and  president  of  the  Philadelphia  Rapid  Transit  Company. 


LARGER  ASPECTS  95 

meant.  He  asked:  "Do  you  mean  to  tell  me  that  the  people 
can  get  a  lower  price  if  there  is  a  monopoly  of  all  these  generating 
plants?"  "Yes,"  I  answered;  "that  is  exactly  what  I  mean  to 
tell  you.  Our  business  is  run  on  that  theory.  At  present 
our  highest  price  is  12  cents  a  kilowatt-hour  to  the  smallest 
customer;  but  any  man  who  burns  light  two  hours  a  day,  any 
manufacturer  who  uses  more  electricity  than  that  equivalent, 
can  buy  energy  from  us  at  nine  cents  an  hour.  And  he  will 
buy  it  at  a  much  lower  price  in  the  future."  His  next  question 
was:  "Do  you  make  money?"  "No,"  said  I,  "we  lose  money 
if  you  take  that  basis  of  business  by  itself."  Next  he  wanted 
to  know:  "What  are  you  after?"  My  response  was:  "What 
I  am  after  is  getting  the  lowest  possible  average  cost  of  pro- 
duction to  sell  the  energy  at  the  lowest  possible  maximum 
price."  Then  he  demanded:  "What  are  we  to  do  with  the 
companies  in  order  to  get  them  to  do  that  kind  of  business?" 
In  turn  I  asked:  "What  do  you  do?  Have  they  done  every- 
thing you  think  they  ought  to  do?"  He  concluded:  "If  we 
had  the  authority,  we  would  try  to  make  them." 

"MAKE  YOUR  SECURITIES  GOOD  IN  THE  MARKETS 
OF  THE  WORLD" 

Just  as  sure  as  grass  grows  and  water  runs,  the  people  who 
are  running  their  business  on  the  line  suggested  by  these  various 
charts  will  supply  the  experience  and  compel  every  one  of  you 
to  run  your  business  on  that  basis.  It  is  good  for  you  that  they 
should.  Many  of  you  who  were  present  at  the  Atlantic  City 
meeting  of  the  National  Electric  Light  Association1  heard  Mr. 
Frank  A.  Vanderlip,  president  of  the  National  City  Bank  of 
New  York,  talk  on  the  advantage  of  raising  large  sums  of  money 
for  public-service  business,  instead  of  small  sums  of  money  — 
doing  business  in  a  large  way  —  and  you  heard  him  say  that 
the  financiers  liked  it  and  investors  liked  it.  I  tell  you  that 
it  has  been  much  easier  for  me  to  raise  the  money  to  provide 
for  the  necessary  expenditures  of  our  Chicago  company  since 

1.  This  convention  was  held  on  June  1-4,  1909. 


96  ADDRESSES  OF  SAMUEL  INSULL 

we  have  been  in  the  business  of  keeping  anywhere  from  20,000 
kilowatts  to  30,000  kilowatts  ahead  of  our  demand  than  it 
was  in  the  time  when  I  had  to  raise  about  one-tenth  of  the 
money.  It  is  a  much  easier  proposition.  I  repeat  here  what 
I  said  at  Atlantic  City,  addressing  myself  especially  to  the 
managers  of  the  small  companies:  If  you  are  in  communities 
where  the  business  is  limited,  look  out  for  the  next  community 
and  get  your  two  properties  together;  then  try  to  get  still 
another,  and  so  on,  until  you  have  an  area  that  will  justify 
you  in  building  large,  economical  stations.  If  you  do  that, 
when  the  steam  railroads  come  to  consider  the  question  of 
electrification;  when  the  interurban  and  urban  roads  come  to 
consider  the  question  of  increasing  their  energy  requirements; 
when  the  manufacturers  proceed  to  enlarge  their  establishments, 
needing  more  energy  to  drive  their  machinery  —  then  you  will 
be  able  to  quote  prices  that  will  give  you  the  business  on  a 
basis  that  will  give  you  a  handsome  return  and  make  your 
securities  good  in  the  markets  of  the  world. 


PRODUCTION  AND  SALE  OF  ELECTRICAL 
ENERGY  IN  CHICAGO1 

BEGINNING  by  saying  that  Chicago  is  the  market  place 
of  the  richest  producing  valley  in  the  world,  Mr.  Insull 
remarked  that,  to  assure  its  continued  success  and 
prosperity,  not  only  were  men  needed  —  men  possessing  the 
characteristics  that  have  made  Chicago  great  —  but  these 
men  most  have  at  their  disposal  material  advantages  which 
are  essential  to  the  industrial,  commercial  and  social  life  of  a 
great  city.  Among  these  advantages  the  possibility  of  procur- 
ing cheap  electrical  energy  is  most  important. 

All  electrical  men,  whether  in  the  service  of  the  electricity- 
supply  company  or  in  the  service  of  manufacturing  corporations 
or  engineers  advising  their  clients,  are  equally  interested  in  the 
development  of  electric  service  —  in  the  distribution  and  sale 
of  cheap  electricity  in  the  community. 

The  figures  bearing  on  this  business  are  very  interesting. 
There  is  about  $60,000,000  invested  at  the  present  time2  in 
the  generation  and  distribution  of  electrical  energy  from  central 
stations  within  the  corporate  limits  of  Chicago.  One  may 
gain  a  better  idea  of  what  this  means  when  he  reflects  that  to 
pay  6  per  cent  interest  on  the  money  invested  takes  about 
$400  an  hour  twenty-four  hours  a  day  and  365  days  in  the 
year.  To  enjoy  the  right  to  earn  that  interest  the  company 
has  to  pay,  and  does  pay  with  pleasure,  to  the  city  and  state 
an  amount  in  taxes  and  compensation  that  exceeds  $100  an 

1.  On  October  20,  1909,  Mr.  Insull  was  the  principal  speaker  at  a  luncheon 
of  the  Electric  Club  of  Chicago.     A  large  audience  of  representative  electrical 
men  listened  with  interest  to  the  address.     The  major  portion  of  a  report 
made  at  the  time  for  the  Electrical  World  is  reprinted  here. 

2.  Four  years  later  the  bond-and-stock  liabilities   of  the  Commonwealth 
Edison  Company  were  about  $78,000,000. 

97 


98  ADDRESSES  OF  SAMUEL  INSULL 

hour.  The  total  amount  paid  this  year  in  taxes  and  compensa- 
tion is  about  $900,000.*  It  is  a  common  thing  for  the  news- 
papers in  discussing  public-service  corporations  to  indulge  in 
criticism  relating  to  the  alleged  evasion  of  taxes  on  the  part  of 
these  corporations.  Mr.  Insull  asked  his  hearers  to  believe  in 
view  of  the  statement  he  had  just  made  that  such  criticism 
did  not  apply  to  the  company  of  which  he  has  the  honor  to  be 
the  head. 

STATISTICS  OF  PRODUCTION  AND  DISTRIBUTION 

It  takes  an  average  of  more  than  100  tons  of  coal  an  hour 
8,760  hours  a  year  to  produce  the  energy  which  the  Common- 
wealth Edison  Company  sells.  At  certain  times  in  the  winter 
this  coal  must  be  burned  at  the  rate  of  from  200  to  250  tons  an 
hour.  "Fancy,"  said  Mr.  Insull,  "the  engineering  brainwork 
that  must  have  been  centered  in  that  one  proposition  —  how 
to  get  through  the  grates  250  tons  of  coal  in  an  hour.  To  take 
care  of  the  business,  to  stand  ready  to  deal  with  large  and  small 
consumers  as  they  come  along,  we  have  at  the  present  time  a 
capacity  of  240,000  horse-power,  and  during  this  coming  win- 
ter the  maximum  load  on  our  central  stations  will  be  upwards  of 
200,000  horse-power.  I  do  not  know  how  much  electricity  is 
being  generated  by  water-power  plants  at  Niagara  Falls,  but  I 
think  the  amount  of  electrical  energy  we  get  from  our  steam 
plants  here  in  Chicago  will  compare  favorably  with  that  pro- 
duced by  the  great  plants  at  the  foot  of  Lake  Erie." 

Fifty-four  stations  and  substations  are  needed  to  meet  the 
various  classes  of  business,  from  the  smallest  lighting  installa- 
tion to  the  operation  of  a  railway  system.  These  substations 
have  a  converting  rating  of  275,000  horse-power,  and  the  cur- 
rent that  passes  through  them  is  conveyed  by  a  total  mileage 
of  1,255  miles  of  cable,  4,000  miles  of  overhead  wires  and  a 
conduit  mileage  of  2,200.  This  development  has  taken  place  in 
less  than  thirty  years,  and  in  order  to  take  care  of  the  growth  of 

1.  In  1914  almost  $1,500,000  was  paid  in  taxes  and  municipal  compen- 
sation. Similarly  nearly  all  the  statistical  figures  should  be  increased  to 
describe  present-day  conditions. 


CHICAGO'S  ELECTRICITY  SUPPLY  99 

the  business  the  company  is  spending  about  $4,500,000  a  year, 
or  nearly  $15,000  for  every  working  day  of  the  year.  These 
figures  give  some  idea  of  the  investment  side  of  the  electric- 
service  business  in  Chicago. 

RATES  DECREASE  WITH  INCREASE  OF  OUTPUT 

Mr.  Insull  declared  that  the  kilowatt-hours  sold  between 
1896  and  1909  had  multiplied  forty  times,  and  he  said  that  the 
extent  of  the  business  was  now  such  that  the  saving  of  0.001  of 
a  cent  in  the  manufacture  of  a  kilowatt-hour  would  amount  to 
about  $4,500  a  year.  Forming  a  striking  comparison  with  the 
increase  of  the  business  is  the  decrease  in  average  rates.  The 
company's  income  for  the  year  1909  is  only  25  per  cent  per  unit 
sold  of  the  income  received  in  1896.  Of  course,  the  gross  in- 
come is  much  larger,  but  statistics  show  the  decrease  of  the 
average  rate  at  which  a  kilowatt-hour  is  sold.  This  marked 
decrease  in  rates  has  been  accomplished  by  improved  apparatus, 
concentration  of  production  and  success  in  selling  the  greater 
volume  of  output. 

THE  DAY  OF  THE  ISOLATED  PLANT  HAS  PASSED 

The  speaker  referred  to  the  sale  of  electricity  as  a  monopoly 
business,  and  said  that  an  isolated  electric  plant  is  as  much  of 
an  anomoly  as  an  isolated  gas  plant  or  an  isolated  waterworks 
would  be.  He  contended  that  the  day  of  the  isolated  plant 
has  passed,  and,  whether  for  supplying  electricity  to  an  office 
building  or  for  the  electrification  of  the  terminal  of  a  great 
railroad,  there  is  no  economical  justification  for  the  existence  of 
such  a  plant. 

"I  wish  to  dwell  upon  this  point,"  said  Mr.  Insull,  "for 
the  benefit  of  those  of  you  who  are  not  engaged  in  the  manufac- 
ture of  energy.  It  you  will  bend  your  energies  to  the  sale  of 
current-consuming  devices,  you  can  build  up  a  business  which 
has  a  permanency;  if  you  bend  your  energies  to  competition 
with  a  power-generating  company,  I  do  not  care  in  what  city 


100  ADDRESSES  OF  SAMUEL  INSULL 

that  company  may  be  located,  you  are  in  the  course  of  years 
doomed  to  failure.  It  is  not  among  the  possibilities  in  this 
day  that  electrical  energy  can  be  produced  by  small  units  in 
competition  with  the  large  production  on  a  wholesale  basis  of 
the  generating  company." 

Mr.  Insull  made  the  interesting  statement  that  in  looking 
over  the  field  for  his  company  in  Chicago,  as  near  as  he  could 
figure,  the  company  is  doing  only  about  one-third  of  the  possible 
business.  This  does  not  refer  to  the  future  growth  of  the  city, 
but  simply  to  the  possible  electricity-supply  business  in  Chicago 
as  it  exists  today.  The  speaker  then  called  attention  to  a  map 
of  Chicago  showing  the  generating  and  substations  of  the 
company.  Beyond  the  city  limits,  too,  electricity  generated  in 
Commonwealth  stations  is  distributed  as  far  north  as  Milwaukee 
on  the  north  and  Kankakee  on  the  south,  a  distance  of  about 
140  miles. 

POSSIBILITY  OF  RAILROAD-TERMINAL  ELECTRIFICATION 

In  closing,  Mr.  Insull  emphasized  the  fact  that  the  interest 
of  all  members  of  the  Electric  Club  should  be  as  one  in  extending 
the  use  of  electricity.  The  producing  company  is  engaged  in  an 
effort  to  produce  the  largest  amount  of  electrical  energy  at  the 
lowest  possible  selling  price.  The  claim  is  made  for  Chicago 
that  it  has  the  lowest  selling  price  of  any  large  electric-supply 
company  in  the  world.  Taking  the  whole  schedule  of  rates 
through,  it  is  believed  that  electricity  is  sold  cheaper  in  Chicago 
than  anywhere  else  on  either  side  of  the  Atlantic  where  energy 
is  produced  from  steam-driven  stations  or  even  from  water- 
power  stations  established  as  commercial  propositions  to  make 
money.  This  fact  should  mean  a  great  deal  to  those  who 
represent  manufacturing  companies.  If  electricity  is  cheap 
there  is,  of  course,  a  greater  inducement  to  use  current-con- 
suming devices. 

The  cheap  electricity  available  in  Chicago  should  have  an 
important  bearing  upon  the  agitation  in  relation  to  electrifying 
the  terminals  of  the  steam  railroads.  There  are,  of  course, 
important  problems  to  be  settled  before  this  electrification  can 


CHICAGO'S  ELECTRICITY  SUPPLY  101 

be  accomplished,  and  it  is  well  for  all  who  are  not  steam-rail- 
road men  to  treat  these  problems  with  respect.  But  so  far  as 
the  energy -producing  side  of  the  argument  is  concerned,  it  is  a 
mistake  to  say  that  electrification  is  impossible  because  of  the 
cost  of  electrical  energy.  If  this  objection  is  based  on  a  knowl- 
edge of  the  cost  of  electrical  energy  used  for  the  electrification 
of  steam-railroad  terminals  around  New  York,  it  is  based  on 
false  premises  if  it  is  contended  that  the  same  cost  of  electrical 
energy  must  apply  in  Chicago.  It  is  a  fact  that  electrical 
energy  can  be  bought  in  Chicago  considerably  cheaper  than 
it  is  now  being  produced  by  the  two  great  traffic  lines  which  are 
engaged  in  electrifying  their  terminals  in  New  York. 

Mr.  Insull  said  that  he  would  be  glad  to  answer  any  ques- 
tions put  to  him,  and  when  the  applause  following  his  address 
had  subsided  one  visitor  asked  whether  in  case  the  railroad 
companies  in  Chicago  should  decide  to  electrify  their  terminals, 
using  energy  purchased  from  the  Commonwealth  Edison  Com- 
pany, it  would  be  necessary  for  that  company  to  build  new 
generating  stations  to  care  for  this  demand.  The  answer  of 
Mr.  Insull  was  that  his  company  could  take  care  of  any  two 
railroad  terminal  electrifications  in  Chicago,  based  on  the 
present  consumption  of  electricity  by  the  roads  running  into 
the  New  York  Central  station  in  New  York,  with  the  present 
rating  of  the  Edison  stations.  With  additional  equipment 
which  has  been  ordered  to  go  into  service  within  a  year,  two 
additional  terminals  of  like  capacity  could  be  served. 

HEATING  DEVICES  AND  THE  QUESTION  OF  PROFITS 

Mr.  F.  J.  Holmes  asked  how  much  of  a  factor  in  the  growth 
of  the  business  the  placing  of  electric-heating  devices  on  the 
circuits  of  the  company  was  proving  to  be.  Mr.  Insull  an- 
swered that  this  was  a  difficult  question  to  answer.  He  spoke 
of  the  company's  recent  flatiron  campaign,  but  said  that  it  would 
be  difficult  to  trace  exactly  the  amount  of  load  due  to  electric- 
heating  appliances.  The  speaker  said  that  some  years  ago  he 
tried  to  figure  out  the  effect  of  fan  motors  on  the  business,  but 


102  ADDRESSES  OF  SAMUEL  INSULL 

he  had  to  relinquish  the  idea  of  getting  exact  information,  as 
anything  like  fan  motors  or  electric-heating  appliances,  that 
are  more  or  less  a  matter  of  general  daily  use  among  the  70,000 
or  80,000  customers  of  the  company,  are  difficult  to  trace  as  a 
component  part  of  the  total  load.  Mr.  Insull  added  that  he 
thought  the  reduction  in  the  rates  had  had  the  effect  of  en- 
couraging the  use  of  heating  devices. 

Mr.  J.  W.  Mabbs,  superintendent  of  the  Board  of  Trade 
Building,  referred  to  the  reduction  in  average  rates  and  said 
that  it  would  be  interesting  to  have  a  curve  of  profits  to  compare 
with  it.  To  this  remark  Mr.  Insull  made  answer  to  the  effect 
that  if  there  were  no  danger  from  competition  he  would  be 
glad  to  disclose  in  exact  figures  the  profits  of  the  company, 
showing  the  small  margin  remaining  for  this  purpose. 


THIRTY  YEARS  OF  ELECTRICAL    DEVEL- 
OPMENT— 1879-1 909 1 

IT  IS  a  very  great  pleasure  to  me  to  look  back  over  the  last 
thirty  years.  I  think  it  is  about  thirty-one  years  ago  when 
one  night  in  November,  1878, 1  was  standing  upon  a  dingy 
platform  of  the  Metropolitan  Underground  Railroad  of  London 
—  a  railroad  that  in  my  boyhood  days  we  used  to  call  "the 
Sewer" —  waiting  for  a  train  to  take  me  to  the  house  of  one  of 
the  leading  editors  of  one  of  the  London  weeklies,  into  whose 
service  as  shorthand  writer  (or  shorthand  clerk,  as  the  expression 
was  then  in  England)  I  had  entered  to  eke  out  the  small  salary 
I  got  in  the  City  during  the  day.  My  eye  happened  to  rest 
upon  an  American  magazine  at  a  bookstand,  and  as  I  had  a 
ride  of  some  half  or  three-quarters  of  an  hour  before  reaching 
my  destination,  I  bought  that  magazine.  In  it  I  found,  merely 
by  accident,  a  very  entertaining  article  descriptive  of  the 
work  of  a  man  whose  name,  although  well  known  in  America, 
was  comparatively  little  known  outside  of  the  United  States, 
but  a  name  that  today  is  a  household  word  wherever  current 
literature  circulates.  I  refer  to  the  name  of  Mr.  Thomas  A. 
Edison,  the  inventor. 

At  that  time  we  hardly  knew  of  the  existence  of  the  tele- 
phone. But  few  in  the  world  knew  anything  about  electric- 
lighting  experiments.  The  article  that  I  read  that  night  af- 
fected my  career  in  a  way  that  I  little  thought  on  that  occasion, 

1.  Address  delivered  at  the  fourteenth  annual  meeting  and  dinner  of  the 
Electrical  Trades  Association  of  Chicago  at  the  University  Club,  Chicago, 
November  12,  1909.  This  speech  is  particularly  interesting  by  reason  of  its 
autobiographical  and  historical  data.  It  shows  its  author's  "human  interest" 
in  the  great  industry  with  which  he  is  identified.  A  pleasant  incident  of  the 
dinner  was  the  drinking  of  Mr.  Jnsull's  health,  the  toast  being  proposed  by 
Mr.  Charles  E.  Brown,  the  toastmaster,  in  honor  of  Mr.  Insull's  fiftieth  birth- 
day, which  fell  on  the  preceding  day. 

103 


104  ADDRESSES  OF  SAMUEL  INSULL 

for  within  three  months  after  that  time,  by  an  accident,  purely 
an  accident,  after  being  engaged  by  an  American  who  had  an 
office  in  Lombard  Street  in  London,  I  found  I  was  private 
secretary  to  Mr.  Edison's  European  agent. 

Looking  at  it  today,  when  every  branch  of  electrical  work 
has  been  developed  to  so  great  an  extent,  it  seems  almost  im- 
possible to  realize  that  at  that  time,  when  I  was  on  the  thresh- 
old of  my  career  in  the  electrical  business,  there  was  little  or 
nothing  in  the  way  of  telephone  service.  (I  am  now  speaking 
about  the  time  of  January,  1879.)  There  were  a  few  telephone 
exchanges  in  this  country.  My  friend  Mr.  Sunny,1  who  en- 
tered the  service  of  the  Chicago  Telephone  Company  in  May, 
1879,  informs  me  that  probably  there  were  two  or  three  ex- 
changes in  Chicago.  We  find  that  the  record  shows  that  the 
first  one  was  opened  in  New  Haven  some  time  during  the  pre- 
vious year,  1878;  but  you  could  not  find  anywhere  outside  of  the 
United  States  in  the  spring  of  1879  a  telephone  exchange. 
The  first  one  erected  in  London  was,  I  think,  put  in  service 
some  time  in  the  fall  of  1879,  and  it  was  my  privilege  to  operate 
it  for  the  first  half -hour  that  it  was  in  operation. 

If  you  go  a  little  farther  back  than  thirty  years  ago,  you  will 
find  that  the  only  source  of  electrical  energy  was  the  voltaic 
battery,  and  it  is  not  until  early  in  the  seventies  that  you  can 
discover  anything  in  the  records  descriptive  of  the  dynamo  as 
a  producer  of  electricity,  such  as  we  know  it  today.  Little  or 
nothing  at  that  time  had  been  accomplished  in  connection  with 
electric  lighting.  In  Europe  some  work  had  been  done  by 
Werner  von  Siemens  and  some  of  his  associates,  and  there  was 
a  distinguished  Russian  engineer  by  the  name  of  Jablochkoff 
who  had  produced  what  was  known  as  the  Jablochkoff  candle, 
a  form  of  arc  lamp  which  was  exhibited  on  the  Avenue  de 
1'Opera  in  Paris  in  1878,  and  a  few  months  later  on  the  Thames 
Embankment  and  Waterloo  Bridge  in  London. 

Mr.  Jablochkoff's  efforts,  although  of  great  consequence  in 
the  development  of  the  art,  outlivetl  his  first  experiments  only 

1.  Mr.  Bernard  E.  Sunny,  president  of  the  Chicago  Telephone  Com- 
pany and  several  other  telephone  companies  (1915). 


THIRTY  YEARS  IN  RETROSPECT  105 

a  very  few  years,  and  I  think  never  amounted  to  anything  in 
this  country  except  that  in  1881  a  few  lamps  were  put  on  ex- 
hibition by  my  lamented  friend,  Mr.  Charles  Cheever,  who  made 
quite  a  reputation  in  connection  with  the  early  introduction  of 
the  telephone. 

THE  INVENTION  OF  THE  TELEPHONE 

We  have  to  go  back  to  the  Philadelphia  Centennial  Ex- 
position of  1876,  where  Alexander  Graham  Bell  first  exhibited 
an  instrument  that  carried  the  utterances  of  the  human  voice 
imperfectly  over  a  wire  by  means  of  electricity.  I  have  an  old 
friend  in  New  York  who  has  been  in  the  electrical  business  a 
few  years  longer  than  I  have  myself,  and  who  tells  me  that  he 
visited  the  Centennial  Exposition  and  saw  the  first  exhibition 
of  the  telephone,  when  Dom  Pedro  of  Brazil  was  visiting  the 
exposition.  There  are  some  enthusiastic  admirers  of  Mr. 
Edison  who  declare  that  they  saw  experimental  instruments  in 
use  at  Menlo  Park  a  little  prior  to  that,  which  gave  as  much  in 
the  way  of  conversation  as  the  work  of  Mr.  Bell. 

I  think,  and  I  have  no  doubt  that  all  in  this  room  think, 
that  the  credit  for  the  invention  of  the  telephone  must  be  given 
to  Alexander  Graham  Bell,  just  as  I  think  that  the  credit  for 
the  invention  of  the  carbon  transmitter  that  we  all  use  today, 
whatever  may  be  the  claims  of  other  inventors,  must  be  given 
to  Thomas  A.  Edison. 

ELECTRICAL  SUPPLY  DEALERS  OF  THIRTY  YEARS  AGO 

Take  your  own  line  of  business.  What  was  its  situation 
thirty  years  ago?  There  was  little  or  nothing  known  of  an 
electrical  supply  organization.  The  only  material  to  be  sold 
was  material  for  telegraphic  work  and  house-bell  work.  There 
were  three  supply  houses  in  New  York  —  Tillotson's,  Bunnell's 
and  that  of  Charles  T.  Chester.  The  Western  Electric  Com- 
pany, whose  headquarters  as  you  all  know  are  in  this  city, 
had  a  branch  at  that  time  in  Church  Street,  New  York,  and  it 
did  more  or  less  of  a  supply  business. 


106  ADDRESSES  OF  SAMUEL  INSULL 

At  that  time  the  greater  part  of  the  supply  business  was 
done  by  mail  on  special  orders,  and  about  the  only  concerns  I 
can  find  any  record  of  were  Partrick  &  Carter  of  Philadelphia, 
Watts  of  Baltimore,  Buell  of  Cleveland,  and  Charles  Williams, 
Jr.,  of  Boston,  who  was  afterward  taken  into  the  Western 
Electric  Company.  I  believe  my  old  friend,  Mr.  E.  T.  Gilli- 
land,  also  did  more  or  less  of  a  supply  business  in  Indianapolis. 
But  what  we  know  as  the  electrical  supply  business  as  we  have 
it  today  had  practically  no  existence  then. 

I  can  remember  when  I  arrived  in  New  York  in  1881, 
Tillotson's  and  Bunnell's  (I  think  the  latter  was  J.  H.  Bunnell 
&  Company  and  I  think  the  style  of  Tillotson's  concern  was 
Tillotson  &  Sons)  had  establishments  somewhere  in  the  neigh- 
borhood of  the  then  and  present  Western  Union  Building,  on 
the  side  streets  near  195  Broadway.  If  you  went  into  their 
stores,  you  found  that  they  resembled  more  a  storehouse  of 
one  of  the  big  iron-wire  concerns  than  what  we  would  consider 
an  electrical  supply  store.  The  business  was  of  little  or  no 
consequence,  and  in  contrasting  the  situation  as  it  existed  then 
and  as  it  exists  now  we  are  forced  to  the  conclusion  that  the 
business  in  which  we  are  all  engaged  is  really  a  product  of  the 
last  quarter  of  a  century. 

Take  the  situation  of  the  telegraph  and  cable  lines.  If  you 
wanted  to  send  a  message  from  New  York  to  London  at  that 
time,  my  recollection  is  it  cost  a  dollar  a  word.  I  was  more 
familiar  with  it  from  the  other  end  of  the  line,  however,  and  it 
used  to  cost  us  four  shillings' a  word. 

Take  the  telegraph  tolls  in  the  United  States.  Mr.  Sunny 
informed  me  today  that  the  telegraph  rate  between  New  York 
and  Chicago  thirty  years  ago  was  $1.15  for  ten  words,  and  the 
rate  between  New  York  and  San  Francisco  was  five  dollars 
for  ten  words. 

Thirty  years  ago  we  were  on  the  threshold  of  enormous 
industrial  changes  the  world  over,  and  the  greatest  of  those 
industrial  changes  have  been  changes  that  have  brought  us  the 
telephone,  the  electric  light,  the  electrical  transmission  of 
power,  the  electric  railway,  the  wireless  telegraph  and  the  hun- 


THIRTY  YEARS  IN  RETROSPECT  107 

dred  and  one  small  things  that  have  followed  in  the  wake  of  these 
various  enterprises. 

THE  BEGINNINGS  IN  ELECTRIC  LIGHTING 

In  1879  the  only  electric-light  service  that  anything  was 
known  about  in  this  country  was  the  work  of  Mr.  Brush,  of 
Cleveland,  Elihu  Thomson,  Professor  Houston  and  a  few  others 
who  were  engaged  in  series  arc-light  business. 

Mr.  Edison's  work  on  incandescent  lighting  was  just  being 
talked  about.  I  think  it  was  in  December,  1878,  that  it  was 
first  discussed  in  the  public  press.  This  discussion  was  fol- 
lowed by  a  rather  sensational  drop  in  the  price  of  gas  shares  the 
world  over;  but  it  was  not  until  about  a  year  later,  in  1879. 
that  Mr.  Edison  made  his  first  exhibition  at  Menlo  Park  of  his 
paper  carbon  lamp,  and  it  was  not  until  the  summer  of  1880 
that  any  of  those  experimental  lamps  found  their  way  outside 
of  the  laboratory.  It  was  my  privilege  in  August,  1880,  to 
see  one  of  Mr.  Edison's  first  lamps  lighted  up  to  a  dull  red  in 
the  basement  of  a  building  in  Queen  Victoria  Street,  London, 
the  energy  for  lighting  the  lamp  being  supplied  by  about  forty 
cells  of  Grove  battery. 

When  I  came  to  this  country  on  the  first  day  of  March,  1881,1 
the  discussion  in  the  public  press  with  relation  to  electrical 
matters  turned  on  whether  Edison,  to  use  a  popular  expression 
of  that  day,  had  succeeded  in  subdividing  the  electric  light,  or 
whether  the  claims  that  he  made  of  success  in  that  direction 
were  simply  the  vaporings  of  a  wild  imagination.  There  were 
very  few  people  on  either  side  of  the  Atlantic  who  had  any 
belief  whatever  in  what  had  been  accomplished  up  to  that 
time. 

Notwithstanding  the  fact  that  there  was  a  complete  system 
of  underground  distribution  —  I  should  say  a  complete  two- 
wire  system  of  underground  distribution  —  fed  by  feeders  from 
a  central  point,  and  that  that  system  was  operating  lamps 
and  motors  in  multiple  out  at  Menlo  Park,  there  were,  as  I 

1.  This  should  be  February  28,  1881.     See  note  on  page  xxvi. 


108  ADDRESSES  OF  SAMUEL  INSULL 

say,  very  few  people  who  had  the  slightest  belief  in  the  com- 
mercial value  of  Mr.  Edison's  work. 

On  the  second  night  that  I  was  in  this  country,  I  was  taken 
out  to  Menlo  Park  by  Mr.  Edison.  We  arrived  there  about  nine 
o'clock  in  the  evening,  and  I  well  remember  how  surprised  I 
was  to  see  the  fields  around  his  laboratory,  the  houses  of  himself 
and  his  assistants,  all  illuminated  by  this  wonderful  new  light, 
using  a  carbon-filament  lamp  —  a  decided  improvement  on  the 
paper-filament  lamp  which  I  had  seen  hi  London.  I  recall 
that  I  was  quite  impatient  on  that  occasion  to  run  down  to  the 
railroad  station  from  the  laboratory,  about  half  a  mile  away, 
to  send  a  cable  to  my  friends  in  London,  telling  them  that  I 
had  seen  Edison's  system  in  operation.  About  ten  or  twelve 
days  later  I  received  an  acknowledgment  from  the  man  to 
whom  I  cabled,  a  man  who  is  now  the  representative  of  the 
Western  Electric  Company  in  London,  in  which  he  said  he  sup- 
posed I  had  been  in  America  just  about  long  enough  to  be  able 
to  draw  the  long-bow  as  well  as  any  of  those  Yankees  with 
whom  I  had  been  associating. 

It  is  a  matter  of  very  great  interest  to  those  of  you  who  follow 
the  engineering  side  of  this  business  to  know  that  this  first 
exhibition  of  Edison's  electric  lighting  system  at  Menlo  Park 
obtained  its  power  partly  from  a  direct-connected  unit,  com- 
posed of  a  dynamo  of  Mr.  Edison's  design,  and  an  engine 
manufactured  by  Mr.  Charles  T.  Porter,  the  engine  being  of  the 
type  commonly  known  throughout  the  country  as  the  Porter- 
Allen  engine.  I  think  it  was  possibly  about  60  horse-power, 
and  my  recollection  is  that  it  ran  somewhere  between  five  and 
six  hundred  revolutions  per  minute. 

It  is  rather  remarkable  that  the  first  engineering  effort  in 
connection  with  the  development  of  the  great  industry  which 
goes  such  a  long  way  toward  supporting  practically  all  of  the 
businesses  represented  in  this  room,  outside  of  the  telephone 
interest,  should  have  been  so  correct  as  to  be  composed  of 
a  class  of  apparatus  that  we  all  went  back  to  a  quarter  of  a 
century  afterwards.  I  think  this  fact  is  one  of  the  greatest 
tributes  to  Mr.  Edison's  engineering  ability. 


THIRTY  YEARS  IN  RETROSPECT  109 

THE  STAETING  OF  CENTRAL  STATIONS 

You  must  excuse  me  if,  in  reviewing  electrical  progress 
during  the  last  thirty  years,  I  mention  the  name  of  Mr.  Edison 
so  frequently;  but  as  I  understand  electrical  development,  it  is 
impossible  for  me  to  do  otherwise.  If  you  will  study  the 
records  of  the  United  States  Patent  Office,  you  will  be  forced  to 
the  conclusion  that  at  least  from  one-half  to  three-quarters  of 
the  electrical  development  which  we  enjoy  at  the  present  time 
can  be  traced  fundamentally  to  the  great  intellect,  the  great 
genius,  of  the  man  under  whose  name  it  has  been  my  privilege 
to  work  for  thirty  years. 

It  was  not  until  1882  that  the  first  central  station  for  in- 
candescent lighting  was  put  in  operation  in  New  York  city. 
At  that  time  the  telephone  business  had  attained  considerable 
proportions.  The  old  fight  in  this  country  between  the  Bell 
interests  as  represented  by  the  American  Bell  Telephone  Com- 
pany, and  the  Edison  interests  as  represented  by  the  Western 
Union  Telegraph  Company,  had  been  settled,  and  the  entire 
telephone  business  was  operated  then,  as  it  is  largely  now,  as  a 
monopoly  business. 

About  the  same  time  that  the  central-station  electric- 
lighting  plant  was  started  in  New  York  on  Pearl  Street,  just 
south  of  Fulton  Street,  there  was  a  small  plant  started  at  Ap- 
pleton,  Wisconsin.  I  think,  largely  on  account  of  its  small  size 
and  the  ease  with  which  the  smaller  apparatus  could  be  pro- 
duced, the  chances  are  that  the  Appleton  plant  started  before 
the  New  York  plant,  and  therefore  the  Central  West  probably 
can  lay  claim  to  the  honor  of  starting  the  first  commercial 
incandescent-lighting  distribution  system  in  the  world. 

There  had  been  various  efforts  made  in  Europe,  but  they 
were  mainly  in  the  direction  of  series  lamps;  that  is,  lamps  of 
low  resistance  run  in  series.  But  all  systems  of  that  character 
have  long  since  disappeared  as  being  uncommercial,  and  the 
only  system  in  existence  the  world  over  today  is  the  multiple- 
arc  system,  using  high-resistance  illuminants. 

Soon  after  the  starting  of  the  New  York  and  Appleton 


110  ADDRESSES  OF  SAMUEL  INSULL 

plants  there  were  plants  started  in  London,  but  only  for  ex- 
hibition purposes.  There  were  plants  started  about  that  time 
in  Santiago,  Chile,  and  in  Milan,  Italy. 

VARIOUS  STEPS  IN  THE  MARCH  OF  PROGRESS 

To  go  back  to  1879:  The  first  miniature  electric  railway 
carrying  passengers  was  put  in  operation  at  the  Berlin  Ex- 
position, by  Siemens  &  Halske,  in  that  year.  It  was  purely  an 
exhibition  plant,  and  it  was  not  until  two  years  later  that  any 
commercial  road  was  put  into  operation  in  Europe,  and  that 
was  a  small  one  outside  of  Berlin,  a  mile  and  a  half  long.  Not 
long  after  (in  1883,  to  be  exact)  there  was  a  similar  exhibition 
here,  in  Chicago,  on  the  Lake  Front,  in  the  old  Exposition  Build- 
ing where  the  Art  Institute  now  stands.  There  may  be  some 
in  this  room  who  remember  it.  It  was  a  little  circular  rail- 
road, not  to  carry  passengers  but  just  a  toy  railroad,  which 
operated,  I  think,  one  car. 

Electrical  events  came  in  rapid  succession;  but  it  is  an  in- 
teresting thing  to  note  that  it  was  not  until  1881  that  there  was 
any  official  definition  of  any  of  the  electrical  units,  and  it  was 
at  the  Paris  Electrical  Congress  of  1881  that  the  ohm,  the  volt 
and  the  ampere  were  first  authoritatively  defined  as  the  basis 
for  legislative  action  in  the  various  countries. 

It  was  in  this  same  year  that  a  "box  of  electrical  energy," 
what  we  call  the  storage  battery  of  today,  was  carried  from 
Paris  to  Glasgow  by  Sir  William  Thomson,  afterward  Lord 
Kelvin.  It  was  one  of  the  early  storage  batteries,  and  was 
made  by  Camille  Faure.  The  unique  demonstration  attracted 
a  great  deal  of  attention  at  that  time,  but  it  was  years  after- 
ward before  the  Faure  cells  came  into  general  use. 

At  the  Paris  Exposition  of  1881  was  the  first  demonstration 
of  a  direct-connected  dynamo  and  engine  outside  of  Menlo 
Park.  I  had  the  privilege  of  having  a  great  deal  to  do  with 
the  manufacture  of  that  first  unit  in  New  York  and  its  shipment 
to  Paris.  Mr.  Edison's  exhibit  in  Paris  of  that  unit  was  made 
by  Mr.  Charles  Batchelor,  one  of  his  earliest  assistants. 


THIRTY  YEARS  IN  RETROSPECT  111 

Between  1882  and  1886  the  alternating  system  supple- 
mented the  direct  system  and  came  into  general  use,  and  some 
time  during  that  same  period  the  three-wire  system  of  Edison 
was  put  into  use.  By  this  great  improvement  in  wiring  the 
amount  of  copper  necessary  for  the  direct-current  system  was 
cut  down  so  that  we  got  along  with  about  40  per  cent  of  the 
copper  originally  required. 

The  introduction  of  the  alternating  system  and  the  Edison 
three-wire  system  gave  a  tremendous  impetus  to  the  electric- 
lighting  business.  It  was  but  a  very  few  years  before  the 
electric-lighting  business  assumed  proportions  rivaling  those 
of  the  telephone  industry,  and  we  began  to  see  the  springing  up 
all  over  the  United  States  of  establishments  for  the  sale  of 
apparatus.  From  my  own  personal  experience,  and  much  to 
my  own  cost,  I  can  assure  you  that  at  that  time  we  needed  a 
credit  association  very  badly  indeed. 

The  electric  welding  of  Elihu  Thomson  was  first  brought  out 
in  1886. 

The  first  serious  efforts  at  electric-railway  work  in  this 
country  were  made  in  1888.  Some  years  earlier,  in  1880,  Mr. 
Edison  had  built  an  experimental  road  at  Menlo  Park,  and 
Mr.  Stephen  D.  Field  had  done  considerable  work  in  connection 
with  electric  railways;  but  it  was  not  until  1888  that  Mr. 
Frank  J.  Sprague's  first  electric  road  was  started  at  Richmond, 
Virginia.  We  have  in  this  city  at  least  two  men  who  were  en- 
gaged on  that  work  —  Mr.  A.  D.  Lundy,  of  the  firm  of  Sargent 
&  Lundy,  and  Mr.  Frank  J.  Baker,  the  vice-president  of  the 
North  Shore  Electric  Company.1 

CENTRAL  STATIONS  AND  POWER  TRANSMISSION 

In  that  same  year,  1888,  the  first  central  station  was  estab- 
lished in  the  city  of  Chicago.  At  that  time  there  were  a  large 
number  of  isolated  plants,  in  fact  I  think  more  in  Cook  County, 
in  proportion  to  population,  than  in  any  other  part  of  the  United 

1.  Later  the  North  Shore  Electric  Company  was  merged  in  the  Public 
Service  Company  of  Northern  Illinois,  of  which  Mr.  Insull  is  (1915)  president 
and  Mr.  Baker  one  of  the  vice-presidents. 


112  ADDRESSES  OF  SAMUEL  INSULL 

States,  but  no  efforts  had  been  made  in  the  direction  of  central- 
station  work  here  until  some  time  in  1887,  when  the  Chicago 
Edison  Company  was  formed.  It  was  in  1888  that  the  first 
Edison  central-station  plant  in  Chicago  was  started  at  139 
Adams  Street.1  When  I  came  to  Chicago  in  July,  1892,  I 
think  that  the  plant  had  arrived  at  the  enormous  proportions 
of  somewhere  between  three  and  four  thousand  horse-power. 
I  think  they  used  to  try  to  run  a  little  more  than  that,  but  that 
was  about  our  limit  at  that  time. 

It  was  in  1888  also  that  Mr.  Nikola  Tesla  contributed  very 
materially  to  the  development  of  the  alternating  side  of  the 
business.  His  polyphase-current  patents,  which  forms  the 
basis  largely  of  the  alternating  dynamos  and  motors  of  today, 
were  taken  out  at  this  time. 

Probably  the  Paris  Exposition  of  1889  was  the  milestone 
which  signalized  the  great  progress  of  the  electric-lighting  art 
the  world  over.  At  that  exposition,  or  rather  at  a  congress 
held  at  the  time  of  that  exposition,  we  first  heard  of  the  watt. 
It  was  authoritatively  defined  by  the  International  Electrical 
Congress  of  that  year,  and  what  today  is  a  household  word  with 
all  the  people  who  have  to  pay  for  electricity  on  a  meter  basis  — 
the  much-discussed  "kilowatt" — has  grown  out  of  the  defi- 
nition established  by  the  authorities  at  the  Congress  of  1889. 

The  first  electric-power  transmission  dates  from  1890. 
There  was  a  system  laid  out  in  a  small  town  in  Colorado,  at 
one  of  the  mines  in  that  state.2 

The  progress  of  the  electric-lighting  art  was  signalized 
further  by  the  Chicago  World's  Fair  of  1893.  That  was,  above 
everything  else,  an  electrical  display.  We  find  that  there 
they  went  back  to  the  direct-connected  dynamos,  using  marine 
types  of  engines  for  the  purpose.  Two  of  those  engines  which 
were  shown  at  the  World's  Fair  are  still  (1909)  in  use  at  the 
Harrison  Street  station  of  the  Commonwealth  Edison  Com- 
pany. 

1.  Now  1520  West  Adams  Street.     See  note  on  page  319. 

2.  The  famous  Lauffen-Frankfort  experimental  transmission  in  Germany 
was  also  accomplished  in  1890. 


THIRTY  YEARS  IN  RETROSPECT  113 

X-rays  were  discovered  by  Roentgen  in  1895,  and  in  the 
same  year  Marconi  effected  communication  by  wireless  tel- 
egraphy in  Italy  for  the  first  time. 


THE  STEAM  TURBINE  AND  WHAT  CAME  AFTER  IT 

Since  then  we  have  had  the  most  wonderful  progress.  We 
have  had  the  steam  turbine,  the  first  large  unit  being  started 
hi  this  city  in  1903.  I  refer  to  the  steam  turbine  of  American 
manufacture.  Prime  movers  of  this  type  had  been  made  with 
more  or  less  success  in  different  parts  of  Europe,  and  especially 
in  England,  a  number  of  years  before  the  year  mentioned; 
but  the  large  use,  or  rather  the  use  of  large  units  as  we  under- 
stand them  in  the  central  stations  of  today,  where  we  use  units 
running  up  to  as  high  as  22,000  horse-power,  dates  as  recently 
as  October  2,  1903,  when  the  first  unit  was  started  in  the  Fisk 
Street  station  of  the  Commonwealth  Edison  Company,  Chicago. 

I  have  tried  to  survey  as  rapidly  as  I  could  the  develop- 
ment that  has  taken  place  in  this  wonderful  industry  with 
which  we  are  all  connected,  in  the  short  space  of  thirty  years  — 
a  little  over  a  quarter  of  a  century,  a  period  which  is  covered 
by  the  years  of  most  of  us  in  this  room,  simply  dating  from  our 
boyhood  days,  when  we  were  able  to  read  and  understand  what 
was  going  on  in  the  world. 

Some  of  the  figures  of  the  investments  in  this  business  are 
simply  stupendous.  In  this  city  of  Chicago  alone  there  is 
probably  invested  in  electric  lighting,  telephones,  the  electric 
portion  of  the  street  railways  and  the  elevated  railways,  and 
the  isolated  electric  lighting  plants  throughout  the  city,  a 
sum  which  must  exceed  $500,000,000. 

Just  imagine  for  a  moment  what  that  means.  Here  we 
are,  engaged  in  a  business  that  a  little  over  thirty  years  ago 
was  never  dreamed  of,  and  today  we  have  as  customers  of  the 
concerns  which  are  represented  in  this  room,  businesses  that 
employ  a  capital  of  $500,000,000.  The  figures  are  simply 
stupendous. 

There  are  at  the  present  time  6,100,000  telephones  in  use  in 


114  ADDRESSES  OF  SAMUEL  INSULL 

the  United  States,  and  the  amount  invested  in  exchanges  and 
the  lines  connecting  same  is  upwards  of  $550,000,000. 

There  is  a  track  mileage  of  electric  and  interurban  railways 
of  40,247  miles,  using  89,216  cars,  and  representing  capital 
liabilities  of  $4,557,000,000.  Of  course,  these  figures  represent 
capital  liabilities,  and  probably  some  of  that  capitalization  is 
water;  but  I  personally  would  very  much  doubt  if  the  capital 
invested  in  electric  street  and  interurban  railways  at  the  present 
time,  that  is  the  cash  capital,  the  actual  dollars  put  in,  is  less 
than  $3,000,000,000. 

To  turn  again  to  electric-lighting  investments.  There  are 
about  6,000  central  stations  in  the  United  States  today.  Of 
this  number  upwards  of  3,000  of  the  companies  engaged  in 
central-station  work  are  also  in  the  electrical  supply  business — 
a  business  that  twenty-five  or  thirty  years  ago  had  perhaps 
half  a  dozen  representatives. 

The  central-station  companies  of  the  country  have  an  in- 
vestment of  $1,250,000,000.  They  have  a  gross  income  of 
more  than  $250,000,000  a  year,  and  they  develop  somewhere 
between  2,000,000  and  2,500,000  horse-power. 

The  total  investment  engaged  in  the  three  departments  of 
the  business  on  which  you  gentlemen  in  this  room  depend  for 
your  business  exceeds  the  sum  of  $6,000,000,000.  That  entire 
business  has  been  created,  first,  by  the  wonderful  success  of 
the  electrical  inventors  of  this  country,  who  have  had  no  rivals 
in  what  they  have  been  able  to  accomplish  anywhere  on  this 
earth;  second,  by  the  wonderful  confidence  of  the  capitalists 
of  the  country  in  the  ability  of  those  inventors  to  produce  that 
which  would  be  commercially  successful;  and,  third,  by  the 
adaptability  of  the  people  of  this  country  to  seize  upon  new 
things  which  are  conducive  either  to  their  comfort  or  to  the 
economy  of  their  manufacture  or  to  the  improvement  of  their 
means  of  communication  and  transportation. 

I  think,  gentlemen,  we  can  all  congratulate  ourselves,  first, 
in  being  privileged  to  take  part  in  this  remarkable  business,  and 
second,  in  being  located  in  a  country  where  whatever  new  things 
may  come  along,  if  they  are  things  which  recommend  them- 


THIRTY  YEARS  IN  RETROSPECT  115 

selves  alike  to  the  capitalists  who  provide  the  money  and  the 
users  who  provide  the  revenue  from  day  to  day,  are  promptly 
adopted.  All  I  can  hope  is  that  the  success  of  the  last  thirty 
years  is  only  an  indication  of  the  great  advances  that  all  of  us 
hope,  and  many  of  us  believe,  are  likely  to  take  place  in  this 
wonderful  electrical  business,  in  which  we  are  all  so  proud  to  be 
engaged. 


"SELL  YOUR  PRODUCT  AT  A  PRICE  WHICH 

WILL  ENABLE  YOU  TO  GET  A 

MONOPOLY"1 

"W  TT  TE  DO  NOT  do  the  largest  business  in  the  world,  but 

^/^     I  think  we  have  the  largest  output.     Probably  the 

company  that  comes  next  to  us  is  the  New  York 

Edison  Company,  and  the  next  to  that  is  the  one  in  Berlin, 

Germany.    The  New  York  Edison  Company  has  an  income  of 

about  $15,000,000  and  about  70,000  customers.     We  have  an 

income  of  about  $10,000,000  and  about  100,000  customers. 

In  our  experience  the  most  effective  way  of  getting  business  is 

through  newspaper  advertising. 

Our  average  income  from  our  customers  is  about  2.5  cents 
per  kilowatt-hour.  We  have  customers  who  take  from  us 
1,000,000  to  1,500,000  kilowatt-hours  a  year,  and  there  are 
customers  who  buy  from  us  as  low  as  0.75  cent  per  kilowatt- 
hour,  metered  at  our  station  switchboard.  The  lesson  to  draw 
from  this  is  that  if  you  want  the  best  possible  results  from  the 
manufacture  and  distribution  of  electrical  energy  you  have  got 
to  sell  your  product  at  a  price  which  will  enable  you  to  get  a 
monopoly.  I  am  not  speaking  now  merely  as  the  president 
of  the  Commonwealth  Edison  Company.  I  operate  plants  in 
different  parts  of  the  country  as  small  as  any  of  those  repre- 
sented in  this  room.  If  you  will  bring  your  price  down  to  a 
point  where  you  can  compel  the  manufacturer  to  shut  down 
his  private  plant  because  he  will  save  money  by  doing  so;  if 

1.  The  initial  convention  of  H.  M.  Byllesby  &  Company  and  affiliated 
companies  was  held  in  Chicago  on  January  5-7,  1910.  Mr.  Insull  addressed 
the  convention  briefly  on  January  6,  and  a  portion  of  his  remarks  is  given.  In 
introducing  him,  Mr.  Byllesby  referred  to  the  Commonwealth  Edison  Com- 
pany as  "  the  largest  manufacturing  concern  of  its  kind  in  the  world."  Hence 
the  opening  sentences  in  the  text. 

116 


GETTING  THE  LARGE  BUSINESS  117 

you  can  compel  the  street  railway  to  shut  down  its  generating 
plant;  if  you  can  compel  the  city  waterworks,  whether  pri- 
vately or  publicly  owned,  to  shut  down  its  power  plant  because 
of  the  price  you  quote  —  then  you  will  begin  to  realize  the  pos- 
sibilities of  this  business,  and  these  possibilities  may  exceed  your 
wildest  dreams. 

A  short  time  ago  a  friend  of  mine  drew  for  me  a  series  of 
circles  which  showed  me  that  the  entire  steam-railroad  system 
of  the  country  east  of  Chicago  could  be  operated  better  and 
more  economically  by  taking  advantage  of  the  centers  of 
electrical  production  than  the  railroads  could  possibly  do  if, 
in  electrifying  their  roads,  they  produced  the  requisite  energy 
in  individual  plants. 

Look  to  make  your  money  out  of  the  large  business.  What 
is  large  here  in  Chicago  may  be  beyond,  perhaps,  what  you  can 
get  in  most  of  the  communities  that  are  represented  in  this 
room  this  afternoon.  Nevertheless,  I  am  sure  that  if  you  will 
follow  the  methods  that  we  follow  here,  applying  them  to  the 
conditions  of  the  place  in  which  you  live,  you  will  assist  in 
creating  a  class  of  securities  that  will  stand  well  in  the  markets 
of  the  world.  That  is  the  only  way  that  we  can  expect  that 
eventually  this  electric-service  business  will  be  brought  to  the 
success  which  it  deserves. 


THE  OBLIGATIONS  OF  MONOPOLY  MUST 
BE  ACCEPTED1 

IT  WAS  my  great  privilege  to  be  associated  with  Mr.  Edison 
in  the  earliest  commercial  work  that  he  undertook  in  New 
York  City,  and  only  a  month  or  so  after  I  had  joined  his 
forces,  our  honored  host  of  this  evening  joined  the  engineering 
department  of  the  old  Edison  parent  company,  which  was  the 
pioneer  in  the  development  of  the  incandescent-lighting  in- 
dustry. 

When  we  bear  in  mind  what  has  been  accomplished  in 
the  short  time  since  the  first  central  station  was  established  in 
New  York  in  1882,  and  when  we  remember  that  the  original 
money  invested  by  the  Edison  Electric  Illuminating  Company  of 
New  York  earned  dividends  for  its  stockholders  without  any 
additional  capital  being  supplied  to  bolster  up  that  originally 
put  in,  we  can,  with  understanding,  appreciate  the  strength  and 
stability  of  the  industry  with  which  we  are  connected,  and  the 
great  possibilities  which  must  come  to  it  in  the  future,  if  we 
give  it  that  same  attention  in  regard  to  details  and  develop- 
ments which  those  connected  with  the  industry  have  given  us 
in  the  past. 

Mr.  Byllesby  has  occupied  in  this  industry  by  no  means  a 
minor  position.  I  think,  probably,  on  the  commercial  side  of 
the  business,  he  is  as  much  entitled  to  credit  as  any  one  man 
in  the  development  of  the  alternating  system  which  has  done  so 
much  in  enabling  us  to  establish  large  generating  plants,  giving 
us  the  opportunity  for  great  economy  of  production,  and  estab- 

1.  A  speech  made  on  January  7,  1910,  at  the  dinner  at  the  Congress 
Hotel,  Chicago,  following  the  first  convention  of  H.  M.  Byllesby  &  Company 
and  affiliated  companies.  Mr.  Byllesby  was  toastmaster,  and  he  referred  to 
Mr.  Insull,  in  his  introduction,  as  "the  largest  producer  of  electricity  in  the 
United  States."  The  report  of  Mr.  Insull's  speech  has  been  slightly  condensed. 

118 


OBLIGATIONS  OF  MONOPOLY  119 

lishing  large  distributing  systems,  which  have  added  so  much 
to  the  possible  profits  of  this  business. 


REGULATION,  BOTH  AS  TO  RATES  AND  ISSUING  OF  SECURITIES, 
MUST  BE  ACCEPTED 

Our  friend,  Mr.  Dawes,1  has  referred  to  the  tendency  of 
the  times  so  far  as  legislation  is  concerned.  While  as  an  ab- 
stract proposition  I  think  it  is  very  laudable  for  us  to  cheer  the 
idea  that  we  should  go  out  and  fight  any  curtailment  of  our 
liberty  of  action,  as  suggested  by  Mr.  Dawes,  yet,  as  a  practical, 
everyday  proposition,  and  as  a  necessity,  we  have  to  face  the 
views  of  the  various  communities  of  the  states  in  which  we  are 
engaged.  We  should  bear  in  mind,  above  everything  else  in 
the  operation  of  our  business,  that  we  cannot  afford  to  place 
ourselves  in  opposition  to  public  opinion.  If  we  are  to  main- 
tain values  of  the  securities  for  which  we  are  responsible,  and 
to  increase  those  values,  we  should  rather  bend  our  energies 
to  find  some  means  of  operating  our  business  to  meet  the  con- 
ditions that  will  undoubtedly  confront  us  in  most  of  the  states, 
certainly  the  states  in  the  Mississippi  Valley. 

I  think  it  was  some  twelve  years  ago  that  I  first  tried  to 
voice  the  idea  that  our  business  is  a  natural  monopoly  and 
that  we  must  accept,  with  that  advantage,  the  obligation  which 
naturally  follows,  namely,  regulation. 

For  my  own  part,  I  cannot  see  how  we  can  expect  to  obtain 
from  the  communities  in  which  we  operate,  or  from  the  state 
having  control  over  those  communities,  certain  privileges  so  far 
as  a  monopoly  is  concerned,  and  at  the  same  time  contend 
against  regulation.  Further,  I  think  that  regulation  of  the 
price  of  our  product  must  be  followed  by  regulation  as  to  the 
issuance  of  securities,  because  our  price  must  depend  upon  the 
fixed  charges  we  have  to  pay;  and  I  cannot  see  how  those  fixed 
charges  can  be  kept  down  within  proper  limits  unless  the  au- 
thorities, in  some  way,  either  the  community  or  the  state, 

1.  Mr.  Charles  G.  Dawes,  president  of  the  Central  Trust  Company  of 
Illinois. 


120  ADDRESSES  OF  SAMUEL  INSULL 

have  the  right  to  state  the  terms  on  which  these  securities 
shall  be  issued. 

I  am  not  proposing  to  get  into  a  controversy  with  Mr. 
Dawes  on  this  subject,  but  I  think  we  will  greatly  strengthen 
our  position,  and  greatly  strengthen  the  securities  issued  against 
our  business,  if  we  accept  the  inevitable,  and  instead  of  trying 
to  oppose  the  handwriting  on  the  wall,  try,  rather,  to  direct 
the  tendency  so  indicated  toward  getting  legislation  which  will 
enable  us  to  conduct  our  business  in  a  way  satisfactory  to 
ourselves  and  a  way  satisfactory  to  the  public. 

THE  VALUE  OF  FRANCHISES 

The  franchise  proposition  has  never  seemed  to  be  a  really 
serious  one  to  me.  My  great  trouble  has  always  been  to  get 
the  money  for  further  development.  If  I  managed  to  get  the 
money,  I  always  found  I  could  live  under  any  franchise  given 
by  any  fair-minded  community.  We  have  had  an  instructive 
experience  in  the  last  few  years  in  this  community  in  relation  to 
franchises  and,  indirectly,  in  relation  to  the  matter  of  capitaliza- 
tion. We  have  had  here  two  great  street-railway  companies. 
One  was  supposed  to  be  run  very  conservatively,  so  that  for 
every  dollar  of  stock  issued  the  actual  cash  was  paid  in.  That 
particular  company  was  looked  upon  as  the  bulwark  of  con- 
servatism. On  the  other  hand,  we  had  another  large  company, 
doing  double  the  business  of  the  so-called  conservative  company, 
capitalized  on  a  very  extravagant  basis.  Now,  the  franchises 
of  the  two  companies  ran  out.  What  did  we  find  when  those 
franchises  expired?  We  found  this  so-called  ultra-conservative 
company,  which  had  never  issued  a  share  of  stock  without  hav- 
ing the  actual  money  paid  in  for  the  shares  issued  at  par  —  we 
found  that  that  company,  which  was  supposed  to  have  been 
operated  in  such  a  conservative  way,  had  for  a  long  period  of 
years  not  allowed  a  single  cent  for  depreciation.  When  it 
became  necessary  to  put  a  value  on  its  property  for  the  purpose 
of  arriving  at  a  new  franchise  arrangement  with  the  city  of 
Chicago,  the  value  placed  was  below  that  of  the  issues  of  the 
securities  of  the  company. 


OBLIGATIONS  OF  MONOPOLY  121 

Take  the  other  company,  where  the  financing  was  of  a  more 
balloon-like  character,  where  the  manager  should  have  been  in 
the  water  business  instead  of  the  street-railway  business. 
Take  also  the  suburban  companies,  to  which  Mr.  Dawes  has 
referred.  We  found  that  those  companies  had  securities  out- 
standing out  of  proportion  to  the  cash  investment.  The 
people  who  held  those  securities  were  laboring  under  a  mis- 
apprehension as  to  the  real  value  of  the  franchises.  As  a 
result,  Chicago  has  got  rather  a  bad  name  on  the  subject  of 
issuing  franchises,  whereas  our  authorities  should  have  obtained 
the  commendation  of  everybody  interested  in  the  business  when 
they  granted  to  the  street-railway  corporations  franchises, 
because  these  franchises  practically  settle  for  all  time  the  street- 
railway  question  in  this  community. 

I  had  not  intended  to  speak  on  this  subject  at  all,  but 
we  cannot  afford  to  oppose  public  opinion,  and  I  think  the  best 
course  we  can  pursue,  if  we  want  to  help  the  properties  in  which 
we  are  interested,  is  to  find  the  protection  we  want  in  the  way  of 
monopoly,  giving  way  to  the  demand  of  regulation,  but  de- 
manding in  return  a  fair  regulation  and  a  fair  valuation,  which 
I  believe  we  can  get  if  we  show  to  the  people  the  value  of  the 
brains  we  have  put  into  the  business,  which  brains  we  have  as 
much  right  to  capitalize  as  the  actual  cash  put  in.  As  far  as 
I  have  been  able  to  find,  companies  operating  in  states  where 
there  is  regulation,  such  as  Wisconsin  and  New  York,  which 
are  two  of  the  most  recent  examples  where  there  is  a  state-regu- 
lation law  —  I  say,  so  far  as  I  have  been  able  to  find,  the  com- 
panies who  have  had  to  appeal  to  those  state  commissioners 
have  enhanced  the  securities  of  the  properties  which  they  have 
outstanding,  provided  those  securities  recommend  themselves 
as  reasonable  in  amount. 

THE  WAY  TO  BUILD  UP  THE  BUSINESS 

I  thought  it  might  be  interesting  to  some  of  you  people  to 
know  what  we  are  doing  here  in  Chicago  in  the  development  of 
our  business.  It  was  only  as  recently  as  1888  that  the  first 
central  station  was  started  here  in  Chicago.  In  1892  we  had 


122  ADDRESSES  OF  SAMUEL  INSULL 

4,000  horse-power,  with  a  capital  investment  of  $1,000,000, 
and  a  gross  business  of  $375,000  a  year.  At  the  present  time, 
we  have  power  stations  with  300,000  horse-power,  and  a  capital 
investment  of  $60,000,000  in  our  business,  as  shown  by  a  valu- 
ation made  by  my  friend,  Mr.  Byllesby.  Our  total  business 
is  more  than  $12,000,000  a  year.  We  supply  energy  to  all 
the  street  railways.  We  cover  a  territory  of  65  miles  along  the 
shore  of  Lake  Michigan  and  stretching  inland  for  2,500  square 
miles,  an  area  double  that  of  Rhode  Island,  and  having  a  popu- 
lation as  great  as  the  state  of  New  Jersey  or  the  state  of  Wis- 
consin. We  are  aiming  here,  through  three  different  companies 
co-operating  together,  for  a  centralization  or  production  of 
electrical  energy,  and  look  forward  to  covering  a  territory 
having  a  population  of  five  million  within  our  distribution  area 
and  supplied  by  one  set  of  generating  plants. 

As  I  look  around  this  room  and  see  the  names  on  the  various 
flags  representing  the  various  communities  in  which  H.  M. 
Byllesby  &  Company  are  operating,  naturally  the  thought 
occurs  to  me  what  are  the  possibilities  surrounding  the  territory 
in  which  you  now  do  business?  There  is  no  reason  why  you 
should  not  do  relatively  in  the  smaller  communities  exactly 
what  we  do  in  this  large  community  and  the  territory  surround- 
ing it. 

The  surest  way  to  build  up  your  business  and  to  serve 
your  community  —  and  you  can  only  serve  it  satisfactorily  if 
you  reduce  your  rates  to  a  minimum  —  the  surest  way  you  can 
add  to  the  stability  of  the  local  companies  that  go  to  make  up 
the  strength  of  H.  M.  Byllesby  &  Company  is  to  do  every- 
thing you  can  to  bring  down  the  cost  of  production  in  your 
generating  stations  and  so  to  serve  the  public  as  to  obtain 
and  retain  its  good  will.  Do  not  run  counter  to  the  prejudices 
and  opinions  of  the  people,  and  keep  out  of  politics  all  you 
possibly  can. 


PRESENTATION   OF   THE   EDISON   MEDAL 
TO  ELIHU  THOMSON1 

IT  IS  with  peculiar  pleasure  that  I  rise  on  this  occasion.  A 
few  of  us,  several  years  ago  on  the  occasion  when  the 
Institute  entertained  Mr.  Edison  to  celebrate  the  twenty- 
fifth  anniversary  of  the  introduction  of  his  incandescent  light- 
ing system,2  thought  that  it  would  be  well  to  perpetuate  his 
name,  if  such  a  thing  seemed  at  all  necessary,  by  presenting  the 
Association  with  a  fund  to  enable  it  to  make  an  annual  presen- 
tation of  a  medal  and  certificate  of  meritorious  achievement  in 
electrical  engineering.  That  the  first  recipient  of  the  medal 
should  be  your  honored  guest  of  this  evening  has  seemed  to  us 
peculiarly  appropriate,  for  Professor  Thomson,  by  reason  of 
his  commanding  ability  and  of  his  lovable  personality,  has  in 
recent  years  endeared  himself  to  what  might  be  called  the  "Old 
Edison  Guard"  just  in  the  same  way  as  he  endeared  himself 
to  our  former  opponents  in  business,  the  gentlemen  connected 
with  the  Thomson-Houston  Electric  Company.  We  who  organ- 
ized the  Edison  Medal  Association  feel  deeply  grateful  to  your 
committee  that  the  honor  to  be  conferred  this  evening  should 
fall  to  the  lot  of  Elihu  Thomson. 

When  our  genial  toastmaster  asked  me  two  weeks  ago  if 
I  would  speak  to  the  toast  "  Meritorious  Achievements  in  Elec- 

1.  An  address  delivered  at  the  annual  dinner  of  the  American  Institute 
of  Electrical  Engineers  in  New  York  city  on  February  24,  1910,  on  which 
occasion  the  parchment  certificate  constituting  the  official  notice  of  the  award 
of  the  Edison  gold  medal  was  presented  to  Dr.  Elihu  Thomson,  of  Swampscott, 
Mass.     As  an  ardent  admirer  of  Edison,  Mr.  Insull  was  much  interested  in 
the  bestowal  of  the  Edison  medal  on  this  and  other  occasions.     He  tells  some- 
thing of  the  history  of  the  medal  in  his  speech.     It  may  be  added  that  Dr. 
Thomson  was  given  the  medal  "For  Meritorious  Achievement  in  Electrical 
Engineering  and  Arts,  as  Exemplified   in  his  Contributions  Thereto  during 
the  Past  Thirty  Years." 

2.  This  was  in  1904. 

123 


124  ADDRESSES  OF  SAMUEL  INSULL 

trical  Engineering,"  I  began  to  delve  into  the  past  ages,  and 
found  myself  carried  back  several  centuries  before  the  Christian 
era.  I  was  preparing  to  occupy  your  attention  for  the  whole 
evening,  when  he  very  kindly  switched  me  off  to  deal  with  the 
subject  of  "Meritorious  Achievements  in  Electricity,"  and 
intimated  to  me  that  I  had  better  get  through  with  it  in  about 
ten  or  fifteen  minutes.  So,  instead  of  carrying  you  from  a 
period  five  or  six  hundred  years  before  the  Christian  era 
down  to  Sir  Isaac  Newton  and  the  inventions  of  Benjamin 
Franklin  and  all  the  other  brilliant  lights  who  have  contributed 
so  much  to  the  pioneer  work  in  connection  with  our  great 
profession,  I  found  myself  cut  off  from  delving  in  the  records 
of  the  past,  and  had  presented  to  me  the  necessity  of  confining 
my  remarks,  in  the  few  moments  at  my  disposal,  to  what  has 
really  taken  place  in  what  we  might  call  the  present  day. 

When  we  remember  that  the  first  telegraph  was  put  in 
operation  between  Paddington  in  the  West  End  of  London, 
and  Leyton,  a  small  town  in  Middlesex,  in  what  we  Englishmen 
like  to  call  the  third  year  of  the  Victorian  Era,  and  when  we 
recall  the  fact  that  only  a  few  years  later  the  efforts  made  by 
Morse  and  Vail  resulted  in  the  establishment  of  a  telegraphic 
line  between  Washington  and  Baltimore,1  we  must  realize 
that  the  meritorious  achievements  in  electrical  engineering  are 
practically  modern-day  affairs. 

The  work  in  connection  with  the  telegraph  might  well  be 
called  the  first  great  achievement  in  electrical  engineering. 
The  path  of  electrical  investigation  and  discovery  has  been 
followed  by  a  long  list  of  brilliant  men.  Unless,  as  I  am  re- 
minded by  Professor  Thomson,  we  recall  the  work  of  Benjamin 
Franklin  in  connection  with  lightning  rods,  the  first  real  work 
was  the  establishment  of  the  telegraphic  system  which  has 
brought  about  such  tremendous  changes  in  the  matter  of  inter- 
communication between  all  parts  of  the  world.  The  overland 
systems  of  telegraphy  were  followed  a  comparatively  few  years 
later  by  the  establishment  of  the  under-sea  communication. 

1.  It  was  in  1844  that  the  historic  message,  "What  hath  God  wrought," 
was  sent  over  the  wire. 


THE  EDISON  MEDAL  125 

I  think  the  first  cable  of  any  consequence  to  be  laid  was  one 
between  Dover  and  Ostend,  in  the  North  Sea,  and  which  I 
think  was  put  in  operation  in  the  year  1850  or  1852.  This 
effort  was  followed  by  the  formation  of  the  first  cable  company 
by  Cyrus  W.  Field  and  Peter  Cooper  in  this  city  of  New  York. 
It  was  not  until  1866  that  the  efforts  to  connect  Europe  by 
cable  with  this  vast  continent  were  finally  successful. 

The  next  great  step  in  connection  with  electrical  engineering 
was  the  invention  of  the  telephone.  I  think  it  was  in  1874 
that  Alexander  Graham  Bell  started  his  experiments  which  re- 
sulted in  the  exhibition  of  his  telephone  at  the  Philadelphia 
Centennial  Exposition  in  the  year  1876.  The  first  telephone 
exchange  was  established  in  the  city  of  New  Haven,  I  believe, 
in  1878,  and  the  first  telephone  exchange  erected  outside  of  the 
United  States  was  installed  by  my  friend  Mr.  Edward  H. 
Johnson,  in  London,  and  I  had  the  honor  of  operating  it,  in 
1879,  for  the  first  ten  or  fifteen  minutes  of  its  existence. 

The  next  step  in  the  development  of  this  marvelous  art  was 
probably  the  work  in  connection  with  series  arc  lighting. 
Jablochkoff,  with  his  exhibition  of  his  lamps  on  the  Avenue 
de  1'Opera  in  Paris  in  1878,  and  in  London  in  the  early  part 
of  1879,  and  Brush,  Thomson  and  Houston  in  this  country, 
marked  the  next  step  forward  in  the  development  of  our  in- 
dustry.1 

The  work  of  these  gentlemen  was  followed  in  the  years 
1879  and  1880  by  the  introduction,  experimentally,  of  the 
Edison  incandescent  lighting  system.  Mr.  Edison's  work  in 
this  direction  was  followed  very  rapidly  by  the  alternating- 
current  system  produced  by  Zipernowsky,  and  by  such  men  as 
Bradley,  Tesla,  Stanley,  and  numerous  others,  including  our 
guest  of  this  evening,  in  this  country.  In  passing  I  may  say 
that  it  is  well  to  remember  that  the  one  name  in  this  country 
that  will  probably  stand  out  foremost  hi  connection  with  the 

1.  It  may  be  noticed  that  in  this  brief  sketch  of  electrical  development 
there  is  no  mention  of  the  electric  railway.  This,  Mr.  Insull  has  declared  since, 
was  due  to  a  trick  of  the  memory.  Not  until  he  resumed  his  seat  did  he  realize 
this  oversight  and  the  lack  of  mention  of  the  work  of  Mr.  Frank  J.  Sprague 
and  others  in  relation  to  electric  motors  and  the  electric  railway. 


126  ADDRESSES  OF  SAMUEL  INSULL 

development  of  the  alternating-current  system,  which  has  done 
so  much  to  enable  us  to  produce  electrical  energy  on  a  large 
scale  at  low  cost,  is  that  of  Mr.  George  Westinghouse,  who  has 
contributed  so  much  else  to  the  progress  of  the  country. 

There  are  a  great  many  other  branches  of  the  work  that 
I  might  refer  to  —  the  storage  battery,  the  wireless  telegraph, 
the  work  of  Mr.  Tesla  in  connection  with  alternating-current 
apparatus,  the  work  of  Lord  Kelvin  and  Dr.  Weston,  in  con- 
nection with  instruments  of  precision,  and  the  still  later  de- 
velopment of  the  turbo-generator,  which  has  augmented  to 
such  a  great  extent  the  value  of  the  alternating-current  system. 
We  might  go  on  and  speculate  as  to  the  possibilities  of  the 
future,  as  to  whether  some  member  of  this  Institute  may  at 
some  future  time  receive  this  medal  for  brilliant  achievement 
in  making  a  more  direct  cut  to  get  at  electrical  energy,  prob- 
ably obtaining  it  from  some  mineral  or  some  electro-chemical 
process.  But  the  time  at  my  disposal  has  about  expired,  gentle- 
men, and  all  I  am  able  to  do  is  to  conclude  by  thanking  you 
for  your  close  attention  and  by  expressing  the  hope  that  all 
those  who  receive  this  medal  in  the  future  may  deserve  it  as 
richly  as  the  gentleman  who  is  to  receive  it  tonight. 


MASSING    OF    ENERGY    PRODUCTION    AN 
ECONOMIC  NECESSITY1 

COMING  to  the  home  of  American  manufacturing  I  feel 
some  diffidence  in  addressing  you  on  the  subject  of  the 
possibilities  of  that  manufacturing  business  in  which  we 
are  all  engaged.  Low  cost  of  production,  the  very  best  of 
product,  eminence  in  selling  —  all  these  have  contributed  to 
the  conspicuous  success  of  the  New  England  manufacturers 
during  the  last  fifty  years.  To  attempt  to  advise  you,  brought 
up  amid  so  many  examples  of  economical  manufacture,  on  the 
question  of  the  possibilities  of  our  manufacturing  plant,  seems 
to  me  somewhat  of  a  dangerous  experiment.  What  we  central- 
station  managers  want  always  to  bear  in  mind,  above  every- 
thing else,  is  that  if  we  expect  success  in  our  business  the  first 
thing  we  have  to  do  is  to  produce  the  kilowatt  economically; 
the  next  thing  is  to  learn  how  to  sell  it  so  as  to  bring  the  biggest 
possible  return  on  the  dollar  invested  in  the  plant  for  the  pur- 
poses of  manufacture. 

We  are  engaged  in  a  business  requiring  very  large  capital 
in  proportion  to  our  annual  turnover.  The  very  best  result 
that  can  be  obtained  from  capital  invested  in  central-station 
business  is  to  turn  that  capital  about  once  in  five  years;  I 
think  the  average  result  is  to  get  a  return  on  that  capital  once 
in  seven  years.  To  put  it  another  way,  if  you  have  an  income 
of  $50,000  a  year,  it  takes,  under  the  very  best  circumstances, 
a  capital  of  not  less  than  $250,000  to  operate  that  business, 
or  under  average  circumstances  a  capital  of  about  $350,000. 

1.  The  General  Electric  Company  gave  a  dinner  on  February  25,  1910, 
at  the  Brunswick  Hotel,  Boston,  to  the  central-station  representatives  of  New 
England.  Mr.  Insull  was  one  of  the  speakers  and  made  the  address  printed 
here. 

127 


128  ADDRESSES  OF  SAMUEL  INSULL 

The  manufacture  of  gas  and  the  distribution  of  water  are  also 
characterized  by  the  slow  turning  of  capital. 

Take,  for  instance,  our  small  customers.  In  this  chart1 
there  is  represented  a  block  in  a  residence  district  of  Chicago 
which  has  193  apartments  in  it.  We  have  in  that  block  189 
customers,  and  the  number  of  lamps  per  customer  is  between 
ten  and  eleven.  The  kilowatt-hours  used  per  year  are  33,000. 
If  you  take  the  customers'  separate  maxima,  amounting  to 
68.5  kilowatts,  you  will  find  that  the  load  factor  is  only  5.5 
per  cent.  All  of  you  know  full  well  that  if  your  entire  plant 
is  only  in  use  5.5  per  cent  of  the  time  it  is  only  a  question  of 
time  when  you  will  be  in  the  hands  of  a  receiver.  But  if  you 
take  the  maximum  at  the  transformers  you  will  find  that  the 
maxima  of  the  various  customers  comes  at  such  different  times 
of  the  day  that,  instead  of  the  load  factor  being  5.5  per  cent, 
it  is  19  per  cent,  representing  a  maximum  of  20  kilowatts. 

IMPORTANCE  OF  THE  DIVERSITY  FACTOR 

That  chart  illustrates  every  branch  of  the  electric-light 
and  power  business.  The  problem  that  all  of  you  have  before 
you  is  this  question  of  increased  load  factor.  If  the  possibilities 
of  the  central  station  are  to  go  on  enlarging  in  the  way  that 
most  of  us  hope,  you  have  got  to  get  it  by  an  improvement  of 
load  factor.  That  improvement  of  load  factor  is  produced  by 
an  improvement  in  the  diversity  factor,  or  the  obtaining  of 
customers  who  make  the  maximum  demand  on  you  for  your 
product  at  different  hours  of  the  day,  or  different  days  of  the 
week,  or  different  weeks  of  the  month,  or  different  months 
of  the  year.  Whether  you  are  engaged  in  distributing,  say, 
5,000,000  kilowatt-hours  a  year,  or  whether  you  are  engaged 
in  distributing  500,000,000  kilowatt-hours  a  year,  the  under- 
lying principles  are  precisely  the  same. 

1.  The  map  diagram  to  which  reference  is  here  made  is  one  which  Mr. 
Lisull  used  in  several  of  his  addresses.  It  will  be  found  in  the  present  work  as 
*ig.  1  of  the  chapter  on  "Centralization  of  Energy  Supply,"  page  448.  The 
accompanying  data  have  been  changed  somewhat  with  the  passage  of  time 
but  the  diagram  itself  is  identical  in  all  cases  where  it  was  used 


MASSING  OF  PRODUCTION  129 

I  have  attended  many  meetings  of  various  electrical  associa- 
tions, and  almost  invariably  the  complaint  of  the  representa- 
tives of  the  smaller  central-station  companies  is  that  nearly 
all  the  speeches  delivered  and  nearly  all  the  papers  read  have 
reference  to  the  conditions  that  exist  in  large  cities.  But  let 
me  tell  you,  gentlemen,  that  when  those  who  represent  small 
companies  make  that  assertion  they  are  failing  in  a  recognition 
of  the  underlying  principles  that  govern  their  business.  These 
principles  are  the  same  in  a  town,  say,  of  10,000  people,  as  in 
a  city  of  500,000,  or  1,000,000,  or  2,000,000  people. 

I  have  in  mind  a  plant  whose  total  output  is  5,000,000 
kilowatt-hours  a  year.  The  owners  operate  their  business  on 
a  load  factor  of  about  60  per  cent.  How  do  they  obtain  that 
figure?  They  have  first  the  ordinary  electric-light-and-power 
business.  They  have  a  few  large  manufacturing  establish- 
ments to  which  they  sell  electricity  at  low  prices.  To  this  they 
add  the  street-railway  business  of  the  community  in  which  they 
live,  a  town  of  25,000  people.  They  supply  the  energy  for  a 
couple  of  interurban  railways  that  come  into  that  town,  and 
they  pump  the  water  that  supplies  the  city  supply  to  the 
inhabitants  of  the  town.  I  have  in  mind  another  town,  of 
50,000  people,  where  the  amount  of  electrical  energy  sold  is 
only  about  the  same  as  that  sold  in  the  town  of  25,000  people. 
In  the  second  example  the  business  is  operated  necessarily 
at  a  much  inferior  load  factor,  because  the  company  confines 
its  efforts  merely  to  the  light-and-power  business.  Instead 
of  its  plant  being  in  action  for,  say,  50  per  cent  of  the  time, 
earning  money  to  meet  fixed  charges  and  to  satisfy  the  stock- 
holders, this  second  company  takes  the  position  that  it  cannot 
afford  to  quote  low  rates,  whereas  as  a  matter  of  fact  the  rates 
that  are  quoted  in  the  smaller  town  give  a  much  greater  share 
of  profit.  Not  only  that,  but  the  securities  of  the  first  com- 
pany are  on  a  much  better  basis  than  those  of  the  second. 
Furthermore,  there  is  much  greater  satisfaction  to  the  stock- 
holders, for  whom  we  all  have  to  work.  If  you  will  just  bear 
the  result  of  that  one  block  of  apartments  in  the  North  Di- 
vision of  the  city  of  Chicago  in  mind,  and  remember  that  the 


130  ADDRESSES  OF  SAMUEL  INSULL 

diversity  of  the  demand  raises  the  5.5  per  cent  load  factor  to  a 
19  per  cent  load  factor;  if  you  will  take  that  one  example  home 
with  you,  you  will  have  the  secret  of  changing  your  business 
from  a  comparatively  small  business,  one  which  hardly  pays  a 
return  on  the  investment,  to  a  business  that  will  give  you  a 
very  handsome  return  and  make  your  securities  as  good  as  those 
of  any  of  the  larger  companies. 

GETTING  INTO  A  LARGER  WAY  OF  BUSINESS 

In  starting  to  develop  the  possibilities  of  the  central-station 
business  in  Chicago  we  had  to  contend  with  many  difficulties. 
We  live  in  a  community  where  the  purchasing  power  of  the 
people  does  not  average  particularly  high;  where  there  are 
still  considerable  stretches  of  territory  within  the  city  limits 
that  are  given  over  to  gardening  or  truck-farming.  We  have 
to  cover  a  territory,  including  the  suburban  towns  surrounding 
us,  of  about  2,500  square  miles  —  a  territory  twice  the  size  of 
Rhode  Island.  In  many  parts  of  this  area  the  manufacturing 
business  is  limited.  Moreover,  in  the  manufacturing  districts 
the  establishments  are,  as  a  rule,  very  large  as  compared  with 
the  average  manufacturing  establishment  supplied  by  central- 
station  companies. 

The  perfection  of  the  alternating-current  system,  followed 
by  the  marvelous  development  of  the  steam  turbine,  gave 
us  great  possibilities  of  low  cost  of  production  of  electricity  if 
we  could  find  the  customers  to  take  it  off  our  hands.  We  were 
compelled,  in  order  to  develop  a  large  business,  to  quote  low 
prices,  not  only  to  the  large  consumer  but  to  the  small  house- 
holder. The  man  who  only  pays  us  a  little  over  $18  a  year, 
and  buys  energy  from  us  on  the  basis  of  his  own  personal  load 
factor  of  5.5  per  cent,  is  able  to  buy  our  product  at  about  10 
cents  a  kilowatt-hour.  If  his  load  factor  improves  compara- 
tively little,  he  can  buy  electricity  from  us  at  a  relatively  lower 
price,  according  to  what  his  load  factor  may  be. 

With  the  development  of  the  steam  turbine  we  decided  to 
try  and  get  in  a  larger  way  of  business.  We  thought  that  by 


MASSING  OF  PRODUCTION 


131 


possibly  getting  the  street-railway  business,  or  some  of  the 
street-railway  business,  and  some  of  the  elevated-railway  busi- 
ness, the  combination  of  these  demands  with  our  own  would 
improve  our  load  factor,  partly  as  the  result  of  the  diversity- 
factor  improvement  and  partly  owing  to  the  fact  that  urban 
railways  have  two  peaks  a  day  instead  of  one,  and  consequently 
their  load  factor  would  necessarily  be  better  than  ours.  The 
results  we  have  obtained  so  far  in  that  direction  are  shown  in 
Fig.  1.  Our  maximum  load  last  winter  was  158,000  kilowatts, 


as  shown.  The  maximum  demand  of  the  street-railway  busi- 
ness shows  separately  a  diversity  of  a  little  over  20  per  cent. 
The  maximum  demand  of  the  various  departments  of  our  own 
business  shows  a  diversity  of  a  little  over  5  per  cent.  But 
when  those  are  put  together  we  show  this  winter  so  far  a  diver- 
sity factor  of  12.8  per  cent.  The  winter  is  not  yet  over,  and 
since  I  left  home  they  have  had  more  cold  weather1  in  Chicago. 
The  chances  are  that  before  the  winter  is  passed,  by  a  combina- 
tion of  the  street-railway  business,  elevated-railway  business 

1.  Cold  weather  increases  the  street-railway  load,  additional  energy  being 
required  both  for  traction  and  for  heating  cars. 


132  ADDRESSES  OF  SAMUEL  INSULL 

and  our  own  business,  we  will  have  a  diversity  factor  of  about 
20  per  cent. 

What  does  that  mean?  That  means  that  we  are  able  to 
supply  ourselves  and  the  railways  with  which  we  have  contracts 
with  their  maximum  demand  for  energy  with  20  per  cent  less 
plant  than  the  electric-light-and-power  business  and  the  railway 
business  separately  could  supply  themselves.  I  suppose  it  is 
a  fair  estimate  to  take  the  cost  per  kilowatt  of  central-station 
investment  as  somewhere  near  $100  a  kilowatt.  The  saving  for 
this  particular  winter,  on  the  figures  as  I  make  them,  amounts 
to  somewhere  about  $3,500,000  in  investment. 

LOOKING  FORWARD  TO  THE  ENTIRE  ENERGY  BUSINESS 
OF  THE  CITY 

We  carry  that  still  further.  We  have  tried  to  estimate  the 
amount  of  business  that  we  would  obtain  if  we  did  the  entire 
business  of  the  city  of  Chicago.  At  the  present  time  we 
figure  that  we  are  getting  somewhere  in  the  neighborhood  of 
30  per  cent  of  the  possible  business  offering  in  the  city  of  Chicago. 
I  do  not  mean  30  per  cent  of  the  business  that  we  hope  to  get 
in  the  future  as  the  result  of  the  growth  of  the  city  of  Chicago; 
I  mean  about  30  per  cent  of  the  business  that  is  now  there.  We 
have  generally  the  reputation  of  being  keen  after  business; 
but  if  our  estimates  are  correct  the  business  that  we  now  have 
is  represented,  so  far  as  the  light-and-power  business  is  concerned, 
by  the  shaded  portion  of  the  lower  left-hand  square  of  Fig.  2. 
The  unshaded  portion  of  that  square  represents  the  business 
that  it  is  possible  for  us  to  obtain.  In  arriving  at  the  con- 
clusion as  to  the  business  that  we  can  obtain  we  don't  simply 
include  ordinary  isolated  plants;  we  include  every  industrial 
steam  plant  that  is  operated  in  Chicago.  We  take  the  ground 
that  there  is  no  reason  for  the  existence  of  those  plants  if  we 
can  offer  our  product  at  a  price  that  will  yield  us  a  profit  in 
competition  with  the  plants  of  the  private  owner.  I  don't 
at  all  mean  what  you  ordinarily  talk  of  as  electric-light-and- 
power  business.  Of  course  the  isolated  plants  that  are  still 


MASSING  OF  PRODUCTION 


133 


running  independently  are  included  in  this;  but  I  mean  all  the 
large  and  small  manufacturing  companies  that  operate  their 
own  energy  service. 

Referring  again  to  Fig.  2,  the  shaded  portion  of  the  middle 
square  on  the  left  represents  the  street-railway  and  elevated- 
railway  business  which  we  now  have.  The  unshaded  portion 
of  the  same  square  represents  that  portion  of  this  class  of  busi- 
ness which  we  hope  to  get. 

The  subject  of  the  electrification  of  steam  railroads  is  one 


THIS    DIFFERENCE                                                                  133. 
PERCENT    OF   COMBINED   MAXIMA 

26  4W 

1       I77,3003K.W.   AT  $90  PER  K.W. 

SIB,  967,000 

COMBINED  MAXIMA 
OAD  FACTOR  43.  I°A>                                 » 

NOT 

I 

CO 

g 

-COINCIDENT  MAXIMA        | 
OAD  FACTOR  34.2<% 

STEAM    RAILROADS 
LOAD  FACTOR 
33.3% 

TJ 

STEAM   RAILROADS 

! 

STREET  -RAILWAYS 

LG>'o"-.~v>or;'-", 

STREET  RAILWAYS 

LIGHT  AND  POWER 
LOAD  FACTOR 

30.7% 

LIGHT  AND  POWER 

Fig.  2.    Possibilities  of  Chicago  Electric  Service  in  1909 

very  much  discussed  at  the  present  time,  and  we  have  tried  to 
arrive  at  a  conclusion  as  to  the  amount  of  energy  that  would  be 
consumed  by  the  steam  railroads  centering  in  Chicago  in  the 
event  of  their  electrifying  their  terminal  properties.  By 
"terminal  properties"  I  mean  the  switching  yards,  etc.,  within 
the  city,  and  a  reasonable  length  of  track  outside  of  the  city. 
In  order  to  arrive  at  a  basis  of  the  possible  business  offering  in 
that  direction  and  the  relation  of  the  maximum  load  of  that 
business  to  our  load  conditions  we  have  taken  the  earnings  of 
the  railroads  and  assumed  that  the  maximum  load  would  come 
at  a  time  of  the  year  when  they  earn  the  most  money.  Based 
on  that  information,  we  estimate  that  there  is  the  amount  of 


134  ADDRESSES  OF  SAMUEL  INSULL 

steam-railroad  electricity  business  offering  in  and  around  the 
city  of  Chicago  which  is  indicated  by  the  topmost  square  at  the 
left  in  Fig.  2. 

How  A  GREAT  SAVING  CAN  BE  EFFECTED 

In  the  left-hand  set  of  squares  in  Fig.  2  we  have  placed  the 
maximum  of  each  business  irrespective  of  when  that  maximum 
comes,  and  the  result  shows  a  little  over  34  per  cent  load 
factor.  To  the  right  of  that  we  have  put  the  coincident 
maxima;  that  is,  the  maximum  of  the  electric-light-and-power 
business  occurring  at  the  same  time  as  the  demand  from  the 
street  railways  and  the  demand  from  the  steam  railroads.  I 
think  probably,  so  that  you  will  understand  that  better,  it 
would  be  well  for  me  to  say  that  in  our  experience  in  figuring 
the  possible  steam-railroad  load  the  maximum  comes  in  the 
month  of  October.  Every  man  here  knows  that  the  maximum 
of  his  electric-light-and-power  business  does  not  come  in  the 
month  of  October,  so  that  the  plant  that  would  be  supplying 
the  steam  railroads  with  their  maximum  in  the  month  of 
October  would  be  available  to  supply  the  maximum  for  the 
light-and-power  business  coming  in  December  and  the  maxi- 
mum for  the  street-railway  business  coming,  in  our  part  of  the 
country,  a  little  later,  say  in  January.  The  result  is  that  with 
an  actual  demand  on  us  which  would  indicate  a  load  factor 
of  34  per  cent,  if  you  figure  it  on  the  basis  of  the  non-coincident 
maxima,  which  is  the  true  basis,  you  attain  a  load  factor  of 
43  per  cent. 

Now,  what  is  the  difference  between  the  two?  Not  ten  per 
cent,  gentlemen;  but  it  means  that  your  plant  would  be  in  use 
almost  one-third  more  time  than  if  the  maximum  loads  of  those 
various  lines  of  business  all  came  at  the  same  time.  To  do 
this  entire  business,  based  upon  all  the  maxima  non-coincident, 
would  require  in  the  city  of  Chicago  an  installation  of  655,000 
kilowatts  (see  Fig.  2) ;  that  is,  a  central-station  installation  of 
655,000  kilowatts,  or  practically,  as  we  talk  horse-power,  about 
900,000  horse-power.  On  the  basis  of  when  the  maxima  are 
actually  needed  the  amount  of  plant  you  have  to  provide  to 


MASSING  OF  PRODUCTION  135 

take  care  of  the  whole  of  that  great  business  would  be  rated  at 
522,000  kilowatts,  or  a  difference  of  133,000  kilowatts.  If  in 
addition  to  the  cost  of  the  central-station  installation  you  add 
the  cost  of  conduits  and  cables,  which  can  largely  be  used  in 
common  for  all  the  different  classes  of  business,  you  arrive  at 
the  great  saving  of  nearly  $20,000,000,  resulting  from  placing 
the  generation  and  distribution  of  the  energy  required  in  a 
community  of  2,500,000  people  in  the  hands  of  one  power  com- 
pany. 

COMBINATIONS  MAY  SPELL  ECONOMY 

Within  the  last  week  or  so  the  vice-president  of  the  New 
York,  New  Haven  and  Hartford  Railroad,  appearing  before 
one  of  your  official  bodies  in  Massachusetts,  said  that  in  his 
opinion  within  the  next  fifteen  years  the  New  Haven  road  be- 
tween New  York  and  Boston  would  be  electrified  throughout, 
and  that  the  towns  on  the  way  would  have  the  opportunity  to 
obtain  electricity  at  a  very  low  cost  —  a  cost  dependent  upon 
the  cost  to  the  railroad  company  which  would  necessarily  be 
low,  in  his  opinion,  because  of  the  very  large  amount  of  business 
that  it  would  have  of  its  own.  My  judgment  is,  gentlemen,  that 
as  central-station  managers  we  must  place  ourselves  in  a 
position  to  do  all  classes  of  business.  We  must  forget  that  we 
were  originally  started  to  supply  an  ordinary  light-and-power 
business,  mainly  light.  We  must  do  what  the  gas  companies 
have  done.  They  have  had  to  forget  that  they  were  formed 
originally  as  illuminating  companies,  and  most  of  them  today 
get  a  very  large  share,  the  preponderating  share,  of  their  in- 
come from  other  sources,  mainly  heating  and  cooking.  What 
we  have  to  realize  is  that  it  is  our  business  to  produce  and  dis- 
tribute all  of  the  energy  required  in  the  communities  in  which 
we  do  business.  If  the  communities  in  which  we  do  business 
are  so  small  that  we  cannot  get  a  low  basis  of  production  because 
we  only  manufacture  on  a  retail  basis,  we  must  face  the  in- 
evitable and  remember  that  all  business  is  the  survival  of  the 
fittest.  We  will  do  well  in  that  case  to  combine  with  those 
immediately  around  us;  and  if  that  combination  is  not  large 


136  ADDRESSES  OF  SAMUEL  INSULL 

enough  to  produce  energy  on  an  economical  basis  we  may  find 
it  wise  to  go  farther  afield  for  our  combinations. 

ENLARGING  THE  FIELD  OF  THE  CENTRAL  STATION 

One  of  the  first  authorities  in  the  world,  in  my  opinion, 
on  this  subject  of  the  possibility  of  the  central  station,  is  Mr. 
Coffin's  friend,  Dr.  Emil  Rathenau,  the  head  of  the  great  Gen- 
eral (Allgemeine)  Electricity  Company  of  Berlin.  A  few  years 
ago,  before  the  possibility  of  low  cost  of  production  was  brought 
about  by  the  development  of  the  turbo-generator,  or  rather 
just  at  the  time  when  it  seemed  to  be  in  sight,  I  was  calling  on 
Dr.  Rathenau,  and  I  asked  him  what  he  thought  was  the  next 
step  in  the  development  of  the  central  station.  I  had  started 
at  that  time  to  build  large  stations.  I  started  out  in  Chicago 
with  the  intention  of  having  a  station  of  70,000  kilowatts,  and 
owing  to  the  remarkable  engineering  skill  exhibited  by  Mr. 
Rice1  and  his  staff  that  station,  which  I  had  expected  would  have 
a  rating  of  70,000  kilowatts,  by  the  time  it  was  finished,  with 
the  same  building,  the  same  number  of  boilers,  the  same  grate 
surface,  the  same  stack  capacity,  practically  the  same  amount  of 
money  invested,  had  a  rating  capacity  of  120,000  kilowatts. 
Dr.  Rathenau  did  not  quite  agree  with  me  on  the  question  of 
the  size  of  central  stations;  and  I  pointed  out  to  him  that  my 
conditions  were  very  different  to  those  existing  in  most  of  the 
German  cities,  and  that  the  possibilities  of  energy  distribution 
in  this  country  far  exceeded  those  in  Germany  for  a  given 
amount  of  territory.  But  the  thing  that  he  did  tell  me,  and 
the  thing  that  started  me  thinking  and  led  to  my  enlarging  my 
field  of  operations  around  Chicago  to  a  point  where,  as  I  say, 
we  cover,  not  in  one  company  but  in  three  companies  that  work 
together  and  buy  energy  from  one  another,2  a  territory  of 

1.  Mr.  E.  W.  Rice,  Jr.,  now  (1915)   president   of   the  General   Electric 
Company,  of  Schenectady,  N.  Y. 

2.  Referring,   no  doubt,   to    the   Commonwealth   Edison    Company,   of 
Chicago,  the  North  Shore  Electric  Company,  supplying  suburban  areas  sur- 
rounding Chicago,  and  the  Economy  Light  and  Power  Company,  of  Joliet,  111. 
The  North  Shore  and  Economy  companies  were  merged  into  the  Public  Service 
Company  of  Northern  Illinois  in  1911. 


MASSING  OF  PRODUCTION  137 

2,500  square  miles  —  the  statement  of  Dr.  Rathenau  was  that 
he  thought  before  he  was  through  with  the  electrical  business 
it  would  be  possible  that  around  the  large  centers  of  population 
one  central-station  organization  would  cover  a  radius  of  fifty 
miles.  If  we  are  to  hold  our  business,  and  if  we  are  to  take 
advantage  of  the  opportunities  that  are  bound  to  offer  in  the 
next  few  years  in  supplying  electricity  to  such  large  producers 
as  the  steam  railroads  —  if  that  is  your  goal,  gentlemen,  you 
should  get  together;  you  must  do  away  with  small,  uneconom- 
ical stations;  you  ought  to  get  some  such  results  as  are  shown 
on  this  chart.1 

How  MR.   COFFIN  AND  MR.  INSULL  DECIDED  ON  A  5,000- 
KILOWATT  TURBINE  UNIT 

This  chart  represents  the  increase  in  total  kilowatt-hours 
generated  by  the  Commonwealth  Edison  Company  over  a 
period  of  ten  years.  Ten  years  ago  we  produced  about  35,000,- 
000  kilowatt-hours.  In  1909  we  produced  490,000,000  kilo- 
watt-hours, showing  as  a  rate  of  increase  a  doubling  up  of  our 
business,  say,  every  two  and  a  half  to  three  years.  Now  take 
some  of  the  advantages  that  we  obtained  in  getting  that  out- 
put. The  first  advantage  we  had  was  that  we  were  able  to  call 
on  the  General  Electric  Company  to  design  for  us  very  large 
steam  turbines.  Our  ordinary  electric-light-and-power  business 
would  not  have  warranted  us  in  asking  the  General  Electric 
Company  to  make  for  us  5,000-kilowatt  turbines.  I  remember 
in  the  early  days  of  the  experiments  with  Curtis  turbines  Mr. 
Coffin2  asked  me  if  I  would  oblige  him  by  trying  a  Curtis  tur- 
bine. I  had  already  purchased  reciprocating-engine  units 
that  ran  up  to  about  5,000  horse-power.  I  think  the  General 
Electric  Company  had  an  experimental  Curtis  turbine  at  that 
time  of  some  250  or  500  kilowatts,  and  Mr.  Coffin  asked  me  to 

1.  This  diagram  is  another  of  those  used  on  several  occasions   by   the 
speaker.     In  this  collection  it  appears  (brought  down  to  the  close  of  1913) 
as  Fig.  20  of  the  paper  on  "Centralization  of  Energy  Supply,"  page  469. 

2.  Mr.  C.  A.  Coffin,  then  president,  now  (1915)  chairman  of  the  board, 
of  the  General  Electric  Company. 


138  ADDRESSES  OF  SAMUEL  INSULL 

try  a  1,000-kilowatt  turbine.  I  told  him  it  was  not  any  use  at 
all;  that  we  had  passed  away  beyond  that;  that  the  ordinary 
requirements  of  our  electric-light-and-power  business  demanded 
5,000-kilowatt  units.  I  think  that  the  development  that  we 
have  had  in  the  last  ten  years,  or  especially  in  the  last  six  years, 
is  owing  very  largely  to  the  courage  displayed  by  the  General 
Electric  Company  in  jumping  from  a  little  experimental  machine 
of  250  or  500  kilowatts  and  being  willing  to  take  the  risk  of 
manufacturing,  if  we  were  willing  to  take  the  risk  of  installing, 
steam  turbines  of  not  less  than  5,000  kilowatts. 

Just  see  the  results  that  we  have  obtained  from  the  use  of 
the  turbine.  Here  are  "tons  of  coal  burned."1  From  1901  to 
1904  the  tons  of  coal  burned  show  just  about  the  same  rate  of 
increase  as  the  kilowatt-hours  manufactured,  but  between 
1904  and  1905,  when  we  began  to  get  the  use  of  our  turbines, 
the  lines  crossed,  and  the  difference  between  the  kilowatt-hours 
generated  and  the  tons  of  coal  burned  widened  right  along.  Or, 
putting  it  another  way,  the  pounds  of  coal  per  kilowatt-hour 
produced  went  down  constantly,  as  shown  in  the  diagram. 
While  that  result  was  mainly  owing  to  the  remarkably  high 
efficiency  of  the  turbo-generator  unit,  it  is  also  owing  to  the 
improvement  in  load-factor  conditions.  The  addition  to  our 
business  of  large  wholesale  customers,  such  as  street  railways 
and  elevated  railroads,  has  resulted  in  our  being  able  to  use  our 
manufacturing  plant  33.33  per  cent  more  than  we  were  able  to 
use  it  before  we  went  into  that  line  of  business,  and  there  is 
no  doubt  that  part  of  the  reduction  in  the  pounds  of  coal  per 
kilowatt-hour  produced  comes  from  that  improved  load  factor. 

BENEFITS  FOR  THE  SMALL  CUSTOMER  ALSO 

The  larger  volume  of  business  introduces  better  conditions 
of  operating  from  month  to  month.  The  lowest  load  factor 
at  which  we  have  to  operate  our  stations  is  in  the  month  of 
November2  and  is  43  or  44.  Such  a  condition  of  operation, 

1.  Referring  to  Fig.  20  on  page  469. 

2.  See  Fig.  3  of  chapter  on  "The  Larger  Aspects  of  Making  and  Selling 
Electrical  Energy,"  page  82. 


MASSING  OF  PRODUCTION  139 

being  able  to  operate  our  plant  at  practically  44  per  cent  of 
the  time  for  a  whole  month,  affects  not  only  the  cost  of  our 
total  fuel  used,  but  it  affects  our  labor  costs,  our  repair  costs, 
and  every  item,  including  our  interest  and  depreciation  costs, 
that  goes  to  make  up  the  total  cost  of  energy  at  the  switch- 
board. The  result  is  that  we  have  seen  our  way  to  a  rapid 
reduction  of  rates,  not  only  to  our  small  consumers,  but  also  it 
has  enabled  us  to  introduce  very  much  more  liberal  rates  with 
relation  to  wholesaling  electricity  to  very  large  industrial 
establishments . 

We  have  gained  experience  in  producing  large  volumes  of 
energy,  necessarily  at  low  prices,  because  in  order  to  meet  the 
element  of  competition,  that  is,  the  competition  with  the  rail- 
way company  in  producing  for  itself,  we  have  had  to  quote  low 
prices.  But  the  mere  fact  that  our  business  is  conducted  on 
a  small  margin  has  taught  us  to  study  questions  of  cost  of 
production,  and  I  am  confident  that  one  of  the  reasons  for  the 
fact  that  we  are  able  to  produce  electricity  cheaper  than  any- 
one else  on  either  side  of  the  Atlantic  who  has  to  buy  coal  is 
owing  to  the  fact  that  the  apparent  margin  of  profit  between 
cost  and  selling  price  on  upwards  of  half  of  our  business  is  so 
small  that  we  have  ever  before  us  the  necessity  of  low  cost  of 
production,  highly  efficient  plants,  the  best  kind  of  upkeep, 
and  the  obtaining  of  our  money  at  the  lowest  possible  price  in 
the  markets  of  the  world.  Naturally,  we  are  able  to  meet 
the  last  requirement  owing  to  the  large  volume  of  business 
with  which  we  have  to  deal. 

Now  I  want  to  direct  your  attention  to  the  following 
table.  It  gives  a  comparison  of  customers  in  the  residence 
section  of  Chicago  in  October,  1908,  and  October,  1909.  In 
October,  1908,  we  had  25,900  flats,  and  in  the  same  month  in 
1909  we  had  37,940;  we  had  5,232  houses  the  first  year  and 
6,765  the  second  year,  and  we  had  3,559  small  stores  the  first 
year  and  4,842  the  second  year.  The  income  we  obtained 
in  1908  was  $41,000  from  flats,  and  $62,000  in  1909;  $15,000 
from  houses  in  October,  1908,  and  $20,000  from  houses  in 
1909.  In  small  stores  the  comparison  was  $15,000  and  $20,- 


140  ADDRESSES  OF  SAMUEL  INSULL 

RESIDENCE  SECTIONS  OF  CHICAGO 


Flats 

Houses 

Small 
Stores 

Number  of  Customers  in  — 
October,  1908  
October  1909 

25,900 
37,940 

5,232 
6,755 

3,559 
4,842 

Income  in  — 
October,  1908  

$41,323 

$15,768 

$15,598 

October,  1909  
Average   Income  per   Customer 

October,  1908  
October,  1909  

62,209 

$1.59 
1.64 

20,869 

$3.02 
3.08 

20,885 

$4.38 
4.32 

000.  Now  take  the  average  income  per  customer.  In  1908  it 
was  $1.59  in  the  flats  and  in  1909  $1.64;  in  the  houses  it  was 
$3.02  in  the  former  year  and  $3.08  in  the  latter  year,  and  in 
the  small  stores  $4.38  the  first  year  and  $4.32  the  second  year. 
Between  those  two  periods  there  was  a  slight  reduction  of 
price;  that  is,  of  list  price. 

"Is  THE  FAULT   WITH   You  OR   WITH   YOUR  COMMUNITY?" 

Why  is  it  that  with  reducing  prices  we  get  an  increasing 
income  in  two  cases,  as  shown,  and  a  reducing  income  in  the 
other  case?  The  reason  the  income  was  reduced  in  small  stores 
was  owing  to  the  fact  that  there  electricity  is  used  for  lighting. 
The  increase  in  income  in  the  flats  and  houses  is  simply  the 
result  of  advertising,  canvassing,  educational  work  of  all  kinds. 
Our  experience  is  that  the  lower  we  set  the  price  per  unit  of 
energy,  if  we  will  get  at  our  customers  and  educate  them  to 
the  uses  of  electricity,  the  greater  is  that  use,  within  certain 
limitations.  It  follows  that  our  bills,  and  consequently  our 
profits,  are  greater. 

Almost  as  important  as  low  cost  of  production,  as  massing 
of  production,  is  the  question  of  selling.  You  have  a  notable 
example  of  the  expenditure  of  money  in  the  matter  of  selling 
right  here  in  New  England.  I  don't  know  of  any  more  pro- 
gressive company  in  that  respect  than  the  company  presided 


MASSING  OF  PRODUCTION  141 

over  by  my  friend  Mr.  Edgar,1  and  if  you  expect  to  sell  kilowatt- 
hours,  if  you  expect  your  customers  to  use  those  kilowatt-hours 
at  other  times  than  the  peak,  you  must  educate  them  how  to 
do  it,  and  you  cannot  educate  them  how  to  do  it  unless  you 
spend  money.  The  best  possible  return  that  you  can  get  on 
any  expenditures  that  you  may  make  is  the  return  that  you 
will  get  on  money  expended  in  exploiting  your  business  and 
endeavoring  to  add  to  your  number  of  customers,  we  will  say. 
But  still  more  important  is  the  effort  to  get  the  customers 
that  you  have  to  use  your  product  throughout  as  much  of  the 
twenty-four  hours  as  possible.  The  field  is  almost  limitless  in 
this  direction.  If  you  will  provide  low  cost  of  production  and 
low  selling  prices,  so  as  to  enable  your  customers  to  use  the 
thousand  and  one  devices  that  consume  electricity  at  times 
other  than  the  time  that  brings  your  maximum  load,  you  will, 
I  am  sure,  make  your  properties  of  far  greater  value.  You 
will,  too,  become  far  more  popular  with  the  community,  be- 
cause the  man  who  can  constantly  reduce  his  price  must  of 
necessity  become  more  popular  in  the  community.  Moreover, 
you  will  sell  a  far  greater  number  of  kilowatt-hours  per  capita 
than  you  are  doing  at  the  present  time.  I  don't  want  to  be 
personal,  and  would  not  think  of  drawing  attention  to  any 
individual  case,  or  the  case  of  any  one  company;  but  go  over 
the  records  that  are  published  by  your  own  state  commission; 
study  the  question  of  the  kilowatt-hours  sold  per  capita  when 
you  get  home;  and  if  you  happen  to  be  the  low  fellow  find  out 
whether  the  fault  is  with  you  or  whether  the  fault  is  with  your 
community. 

The  average  purchasing  power  of  the  people  living  in  the 
New  England  states  is  large.  On  the  variation  in  the  electrical 
energy  they  use  per  capita  I  won't  take  the  lowest  amounts, 
because  they  seem  so  absurd;  but  the  figures  vary  in  towns  of 
reasonable  size  from  20  kilowatt-hours  sold  per  capita  per  year 
to  74.  If  I  were  interested  in  a  New  England  property,  or  if 
I  were  running  it  myself  and  I  found  that  I  could  only  reach  the 

1.  Mr.  Charles  L.  Edgar,  president  of  the  Edison  Electric  Illuminating 
Company  of  Boston. 


142  ADDRESSES  OF  SAMUEL  INSULL 

low  number  of  kilowatt-hours  sold  per  capita,  I  would  think 
that  somebody  else  should  take  my  job,  because  I  would  know 
that  such  a  condition  must  finally  very  seriously  affect  the 
investment  for  which  I  was  responsible.  The  situation  must 
of  necessity  compel  high  rates  for  energy.  High  rates  for 
energy  may  exist  in  isolated  cases  today,  but  they  cannot  exist 
permanently  in  this  part  of  the  country,  any  more  than  they 
can  in  any  other  part  of  the  country,  when  you  have  before  you 
the  example  day  after  day  of  the  price  at  which  it  is  possible 
to  manufacture  and  sell  electricity  at  a  profit  right  in  this  city 
of  Boston. 

SUPPLY  THE  NEED  OF  THE  LARGE  USERS,  OR  THEY  MAY 
SUPPLY  YOURS 

Before  I  sit  down  I  want  again  to  emphasize,  above  every- 
thing else,  the  importance  of  working  in  the  direction  of  being 
the  sole  producer  of  electrical  energy  in  a  given  community. 
I  don't  know  that  it  will  come  in  our  time,  although  it  looks 
very  much  like  it,  but  if  the  steam  railroads  should  go  to 
electricity  as  a  motive  power  there  is  no  question  that  they 
will  become  great  factors  in  the  production  and  distribution  of 
electrical  energy,  certainly  in  the  thickly  settled  portions  of 
the  United  States.  We  have  right  within  ourselves  the  ability 
to  get  that  business.  It  is  not  such  an  easy  matter  for  the 
steam  railroads  to  finance  their  development;  they  don't  find 
it  so  easy  to  borrow  large  sums  of  money;  and  if  they  can  be 
relieved  of  the  investment  cost  for  providing  the  plant  necessary 
to  produce  electricity  I  should  think  that  they  would  welcome 
that  relief,  just  the  same  as  they  welcome  relief  from  having 
to  provide  the  capital  to  run  sleeping  cars,  or  to  build  locomo- 
tives or  passenger  cars  or  freight  cars.  The  natural  thing  for 
us  to  do  is  to  be  the  producers  of  energy;  and  I  don't  know  of 
any  better  part  of  the  country,  any  more  favorable  part  of  the 
country  to  pick  out  than  the  states  along  this  portion  of  the 
Atlantic  seaboard.  You  have  large  centers  of  population 
within  every  fifty  or  seventy-five  miles.  You  have  existing  in 
those  centers  of  population  large  central-station  plants.  My 


MASSING  OF  PRODUCTION  143 

own  belief  is  that  in  the  future  those  central-station  plants 
will  either  supply  the  large  users  of  electricity  with  their  energy 
or  else  those  large  users  will  be  supplying  the  central-station 
companies,  in  the  territory  in  which  they  operate,  with  elec- 
tricity and  the  central-station  companies  will  become  simply 
distributing  companies. 

I  think  before  closing  I  will  give  you  some  figures  bearing 
on  this  subject  from  the  situation  existing  around  New  York, 
where  the  first  effort  at  electrification  of  steam  terminals  has 
taken  place.  The  New  York  Edison  Company's  load  factor 
is  about  28.9  per  cent.  The  New  York  Central  Railroad 
Company's  load  factor  is  about  33.7  per  cent.  The  Inter- 
borough  Rapid  Transit  Company's  load  factor  is  about  39.5 
per  cent.  If  you  put  them  all  together  the  load  factor  of 
all  those  businesses  together  is  somewhere  between  42  and 
45  per  cent.  Any  one  of  them  separately  would  only  be  able 
to  use  its  plant  practically  from  30  to  33  per  cent  of  the  time. 
If  they  were  combined  and  bought  their  energy  from  one  central 
generating  company,  the  plant  of  that  generating  company 
would  be  earning  money  practically  50  per  cent  more  of  the 
time  than  if  those  plants  were  run  separately.  If  I  understand 
my  business  correctly,  massing  of  production  for  all  purposes 
is  an  economic  necessity;  and  there  is  no  more  reason  for  build- 
ing separate  plants  for  different  classes  of  business  in  the  city 
of  Boston  or  the  city  of  New  York  than  there  is  for  building 
them  in  the  city  of  Chicago,  where  the  results  have  been 
mutually  satisfactory  both  to  the  company  which  I  operate 
and  to  the  surface  and  elevated  roads  that  pay  us  $2,500,000 
a  year  for  supplying  them  with  electrical  energy. 


TWENTY-FIVE   YEARS    OF   CENTRAL- 
STATION  COMMERCIAL  DEVELOPMENT1 

IT  IS  an  especial  honor,  which  I  very  much  appreciate,  to  be 
given  the  opportunity  of  addressing  you  on  so  notable  an 
occasion  as  the  celebration  of  the  twenty-fifth  anniversary 
of  the  starting  of  this  association.  To  those  of  us  who  have 
been  in  the  central-station  business  since  its  inception  it  hardly 
seems  possible  that  twenty-five  years  have  passed  since  the 
organization  of  the  association  in  Chicago  on  February  3,  1885. 
If,  however,  we  reflect  on  what  has  been  accomplished  in  that 
time  and  recall  that  at  our  first  meeting  our  membership  was 
only  71,  whereas,  if  I  am  correctly  informed,  it  is  at  the  present 
time  5,369,  we  would  seem  to  have  occupied  about  the  allotted 
time  in  our  growth  from  birth  to  that  of  a  young  but  sturdy 
manhood. 

The  organization  was  projected  originally  more  in  the 
interests  of  the  electrical  manufacturers  than  in  the  interests 
of  the  central-station  companies.  The  change  during  the  first 
few  years  was  gradual,  but  for  the  last  twenty  years  the  National 
Electric  Light  Association  membership  has  been  composed  of 
the  companies  engaged  in  the  central-station  business  of  the 
country.  Within  a  comparatively  few  years  still  further 
modifications  in  our  membership  have  taken  place,  and  today, 
besides  having  direct  membership  of  the  central-station  com- 
panies and  the  officials  connected  with  them,  we  have  state 
organizations  affiliated  with  us  as  well  as  company  sections 
composed  of  company  employees.  I  know  of  one  company 
section  in  one  of  the  large  centers  of  population  having  a 

1.  An  address  delivered  on  May  25,  1910,  at  the  St.  Louis  convention  of 
the  National  Electric  Light  Association.  This  paper  was  written  in  advance 
and  read  from  manuscript. 

144 


COMMERCIAL  DEVELOPMENT  145 

membership  of  upwards  of  400,  representing  about  fifteen  per 
cent  of  the  total  central-station  employees  of  that  particular 
community. 

THANKS  DUE  TO  THE  ELECTRICAL  MANUFACTURERS 

In  1885  when  the  National  Electric  Light  Association  was 
formed,  the  development  of  the  central-station  business  was 
confined  almost  entirely  to  a  few  companies  established  under 
the  auspices  of  the  Edison  Electric  Light  Company.  The 
companies  forming  our  early  membership  were  not  engaged  in 
what  we  understand  today  as  central-station  business  but 
were  either  arc-light  manufacturers  and  supply  men  or  those 
companies  that  were  engaged  in  series  arc  lighting,  doing  prac- 
tically no  other  business,  except  that,  in  a  very  few  cases,  a 
small  amount  of  power  and  series  incandescent  business  was 
transacted. 

If  you  will  look  over  the  list  of  the  people  who  attended  the 
first  meeting  to  organize  the  National  Electric  Light  Associa- 
tion, you  will  not  fail  to  be  impressed  by  the  lack  of  central- 
station  men  on  the  committee  of  arrangements,  or  on  the  com- 
mittee of  invitation,  or  on  any  of  the  other  committees  forming 
part  of  the  original  organization.  Our  thanks  for  the  estab- 
lishment of  this  association,  which  in  later  years  has  wielded 
such  a  remarkable  influence  and  has  been  of  such  wonderful 
assistance  in  the  development  of  the  central-station  business, 
are  really  due  to  the  electrical  manufacturers  and  electrical 
supply  people  whose  business  was  to  sell  series  arc-light  plants 
for  city  lighting  and  who,  at  the  time  they  started  our  associa- 
tion, had  little  or  no  conception  of  the  development  of  the 
central-station  business  as  we  now  understand  it. 

How  THE  BUSINESS  WAS  DEVELOPED 

The  strides  made  in  the  commercial  development  of  the 
central-station  business  have  been  so  rapid  that  we  hardly 
realize  how  short  a  time  ago  many  of  us  were  doubtful  as  to  the 
ultimate  outcome  of  the  business  in  which  our  members  are 
engaged. 


146  ADDRESSES  OF  SAMUEL  INSULL 

At  the  Niagara  Falls  meeting,  in  1897,  I  well  remember  the 
paper  read  by  my  friend  Mr.  T.  Commerford  Martin,1  on  the 
"Daylight  Work  of  Central  Stations."  He  started  his  paper 
by  stating  that  the  central-station  industry  had  in  some  re- 
spects been  a  disappointment;  that  after  nearly  twenty  years 
of  work  the  companies  restricted  themselves  injuriously,  by 
remaining  mere  lighting  companies,  and  he  asked  the  question 
what  would  become  of  the  central-station  companies  if  a  new 
lighting  medium  came  into  vogue  and  we  were  deprived  of  our 
illuminating  business  entirely. 

To  get  statistics  of  the  early  days  of  the  business  is  a  dif- 
ficult matter,  but  Mr.  Martin  on  the  same  occasion  showed  that 
in  1886  there  were  410  central  stations  in  the  country;  that  only 
300  of  these  furnished  any  statistics  and  that  of  those  300,  226 
were  only  doing  a  night  business. 

Assuming,  as  Mr.  Martin  did,  that  those  who  did  not  re- 
port were  in  the  same  class  as  the  226  doing  only  a  night  busi- 
ness, we  find  that  out  of  410  so-called  central-station  companies 
325  were  doing  business  only  between  dusk  and  daylight. 

From  these  figures  I  should  judge  that  at  the  time  of  the 
starting  of  the  National  Electric  Light  Association  in  1885, 
there  were  not  more  than  eighty  companies  engaged  in  serious 
central-station  business,  that  is,  in  selling  electrical  energy  for 
all  kinds  of  purposes  every  hour  of  the  twenty-four,  whereas 
today  there  are  probably  upwards  of  6,000  central-station 
companies  in  the  United  States.  It  is  probable  that  to  say 
$10,000,000  represented  the  cash  investment  in  the  business 
in  1885  is  naming  a  very  liberal  amount,  whereas  it  is  authorita- 
tively stated  that  between  $1,000,000,000  and  $1,250,000,000 
represents  the  total  sum  of  the  capital  employed  today  in  the 
central-station  industry  of  this  country. 

EARLY  CENTRAL-STATION  ENTERPRISES 
The  first  commercial  central-station  plant  erected  anywhere 
was  that  installed  by  the  Edison  Electric  Illuminating  Company 

1.  For  many  years  one  of  the  editors  of  the  Electrical  World.  In  1909 
Mr.  Martin  became  secretary  of  the  National  Electric  Light  Association. 


COMMERCIAL  DEVELOPMENT  147 

of  New  York.  It  served  a  territory  about  a  mile  square,  ex- 
tending as  far  south  as  Wall  Street.  The  station  was  located  on 
Pearl  Street  one  or  two  doors  south  of  Fulton  Street.  The 
system  employed  was  the  Edison  two-wire  main-and-feeder 
system.  It  was  put  into  operation  September  4,  1882.  Some 
time  after  the  construction  of  the  New  York  plant  was  begun, 
a  small  central-station  plant,  of  only  250  16-candlepower  in- 
candescent lamps,  driven  by  water  power,  was  projected  at 
Appleton,  Wisconsin.  The  Appleton  plant  was  started  on 
August  20,  1882,  just  two  weeks  before  the  New  York  station 
was  put  into  operation;  so  that,  judging  by  the  date  on  which 
the  first  commercial  plant  was  put  in  operation,  while  New  York 
can  lay  claim  to  the  credit  of  projecting  the  first  central-station 
system,  Appleton,  Wisconsin,  in  the  heart  of  the  Central  West, 
seems  entitled  to  the  credit  of  putting  into  operation  the  first 
commercial  central  station  and  to  have  been  the  pioneer  in  a 
business  which  in  less  than  three  decades  has  grown  from  noth- 
ing to  an  investment  in  this  country  alone  which  can  only  be 
expressed  in  ten  figures. 

The  commercial  development  of  the  business  was  of  neces- 
sity, in  the  early  days,  hampered,  among  other  things,  not  only 
by  a  lack  of  knowledge  of  conditions  governing  the  relation  of 
the  true  methods  of  selling  electrical  energy  to  the  cost  of  pro- 
ducing it,  but  also  by  the  high  capital  cost  of  the  plant  used. 
However,  it  might  be  well  to  state  that  the  first  million  dollars 
invested  in  the  central-station  business  was  that  provided  by 
the  local  Edison  company  of  New  York,  whose  plant  was  put  in 
service  in  September,  1882;  and  this  first  capital  showed  sub- 
stantial earning  capacity,  and  I  believe  paid  dividends  before 
additional  capital  was  raised  by  the  company. 

But  what  could  be  done  under  the  favorable  conditions 
existing  in  New  York  could  not  be  done  elsewhere,  and  the 
commercial  development  had  to  await  the  efforts  of  the  in- 
ventors in  the  direction  of  reducing  first  cost.  It  is  not  my 
purpose  tonight  to  detail  the  marvelously  successful  work 
of  the  many  brilliant  inventors  whose  efforts,  following  Edison's 
original  invention  of  the  central-station  system,  have  contrib- 


148  ADDRESSES  OF  SAMUEL  INSULL 

uted  so  much  to  the  success  of  our  business.  I  shall  but  men- 
tion what  occurs  to  me  as  the  leading  features  which  from  the 
technical  and  engineering  side  have  made  the  central-station 
business  of  today  possible. 

The  change  from  the  two-wire  system  to  the  three-wire 
system,  saving  66.66  per  cent  of  the  copper  necessary  in  dis- 
tribution, and  the  reduction  in  the  energy  consumed  by  the 
incandescent  lamp  from  6.5  watts  per  candle  in  1882  to  3.1 
watts  per  candle  in  1890,  made  the  central -station  business  a 
certain  financial  success  in  cities  of  the  first,  second  and  third 
rank.  The  introduction  of  the  alternating-current  system, 
first  established  in  this  country  at  Greensburg,  Pa.,  in  1886, 
by  the  Westinghouse  Company,  made  the  central-station 
business  available  for  the  small  towns  throughout  the  country. 
The  building  in  1890-1891  of  slow-speed  electric  generators 
directly  connected  to  highly  economical  reciprocating  en- 
gines, usually  of  the  vertical  type,  was  the  first  step  in  the 
direction  of  reducing  first  cost  of  central-station  investment,  and 
also  in  reducing  the  operating  cost  of  the  energy  produced. 
This  made  possible,  and  was  followed  in  1896,  by  the  introduc- 
tion into  this  country  of  the  use  of  high-tension  alternating 
transmission  lines  operating  substations,  in  which  were  in- 
stalled rotary  or  stationary  transformers,  depending  on  whether 
direct  or  alternating  current  was  to  be  distributed  therefrom. 

MASSING  OF  PRODUCTION 

The  combination  of  the  direct-connected  dynamo-engine 
unit  of  high  efficiency,  the  high-tension  transmission  lines  and 
substations,  forced,  on  account  of  the  saving  made,  the  abandon- 
ment of  small  generating  stations  and  the  massing  of  production 
on  a  very  large  scale.  The  limit  of  the  size  of  units  of  power  was 
reached  by  reciprocating  engines  at  about  5,000  horse-power. 
A  demand  sprang  up  as  the  volume  of  energy  produced  increased, 
partly  from  centralizing  production  and  partly  from  in- 
creased business,  for  prime  movers  of  greater  size,  lower  in- 
vestment cost  and  lower  operating  cost;  resulting  in  the  de- 


COMMERCIAL  DEVELOPMENT  149 

velopment  of  very  large  steam  turbo-generators,  which  operate 
today  in  units  of  upwards  of  20,000  horse-power,  and  which 
will  within  the  next  year  be  operating  in  units  of  30,000  horse- 
power. Within  the  last  two  years  the  introduction  of  higher 
efficiency  incandescent  lamps  such  as  the  tungsten  lamp 
has  greatly  reduced  the  cost  of  light. 

I  have  tried  in  the  foregoing  to  picture  to  you  in  as  few 
words  as  possible,  the  technical,  or  rather  the  engineering, 
development  of  the  central-station  business  during  the  last 
quarter  of  a  century.  How  far  the  commercial  development 
of  the  business  has  been  forced  by  the  work  of  the  engineers, 
or  how  far  the  necessities  of  the  salesmen  and  the  business 
managers  forced  the  technical  development,  it  is  difficult  to 
say;  but  the  fact  remains  that  as  the  possibilities  of  economical 
investment  and  economical  production  have  increased,  the 
business  obtained  and  the  energy  distributed  have  increased 
by  leaps  and  bounds,  so  that  it  is  no  uncommon  occurrence 
for  a  central-station  company  to  double  its  output  every  three 
to  four  years. 

THE  QUESTION  OF  RATES 

In  the  early  days  of  the  development  of  the  central-station 
business,  say  for  the  first  ten  years  of  its  existence,  from  1881 
to  1891,  the  customers  of  the  central-station  companies  looked 
upon  our  product  as  more  or  less  of  a  luxury.  Partly  owing 
to  a  lack  of  knowledge  of  the  conditions  governing  the  relation 
of  cost  and  selling  price,  and  partly  owing  to  the  difficulty  of 
getting  our  customers  to  make  the  necessary  investment  to 
connect  with  our  system,  our  service  was  used  rather  as  a  luxury 
or  an  advertising  proposition  than  as  a  necessity.  In  the  early 
days  of  the  business  rates  were  very  high,  corresponding  to  gas 
at  about  two  dollars  per  thousand  feet.  The  discounts  from 
these  rates  were  very  small,  and  most  large  consumers  of  elec- 
trical energy,  even  within  the  area  served  by  a  central-station 
system,  found  it  to  their  advantage  to  install  their  own  plants 
and  manufacture  their  own  electrical  energy.  The  result  to  the 
central-station  company  was  that  the  central-station  business 


150  ADDRESSES  OF  SAMUEL  INSULL 

was  confined  almost  entirely  to  short-hour  consumers,  the  con- 
sequence being  that  the  investment  of  the  central-station 
company  was  in  use  but  a  very  few  hours  out  of  the  twenty- 
four,  the  interest  cost  to  the  company  being  necessarily  very 
high  and  the  operating  cost  correspondingly  high.  It  was  not 
until  the  early  nineties  that  some  of  the  managers  of  the  large 
central-station  properties  of  the  country  appreciated  the  fact 
that  if  they  desired  to  place  their  business  on  the  basis  of  a 
general  public  necessity  it  was  necessary  for  them  to  rearrange 
their  rates  on  such  a  plan  as  would  give  the  long-time  consumer, 
the  man  who  used  the  central-station  company's  investment 
most  steadily  during  the  year,  the  lowest  possible  price;  and 
the  recognition  of  the  necessity  of  meeting  this  condition  may 
possibly  have  had  as  much  to  do  with  reducing  operating  costs 
and  reducing  interest  and  depreciation  costs  as  have  the  wonder- 
ful work  of  the  inventors  and  the  marvelous  skill  of  the  en- 
gineers. 

PROPER  METHODS  OF  SELLING 

It  would  have  been  of  very  little  use  to  the  central-station 
manager  to  have  been  able  to  take  advantage  of  the  large  units 
produced  by  the  manufacturers  for  the  production  of  energy  or 
of  the  economies  introduced  in  the  distribution  systems  by  the 
introduction  of  high-potential  alternating  currents  and  trans- 
former substations,  if  the  methods  of  charging  for  service  had 
not  broken  away  from  the  plan  on  which  the  business  was 
originally  started.  If  you  will  take  the  statistics  of  any  of  the 
central-station  companies,  whether  they  be  large  or  small,  and 
look  for  the  reasons  for  the  enormously  rapid  growth  of  the 
central-station  properties  of  the  country,  you  will,  I  am  con- 
fident, find  that  the  rapid  increase  in  the  amount  of  energy 
sold  responds  absolutely  to  the  putting  into  use  of  liberal  meth- 
ods of  dealing  with  the  company's  customers. 

It  matters  not  by  what  name  you  may  call  it  —  whether  you 
speak  of  it  as  the  improvement  of  your  load  factor,  whether  you 
speak  of  it  as  creating  a  day  load  —  the  fundamental  reason 
for  the  success  of  the  business  in  which  we  are  engaged  is  as 


COMMERCIAL  DEVELOPMENT  151 

much  an  appreciation  of  the  proper  methods  of  selling  our 
product  as  the  opportunity  to  use  the  many  brilliant  inventions 
which  have  been  made  by  the  great  technical  minds  of  our  time. 

I  am  dwelling  upon  this  subject  not  with  any  idea  of  be- 
littling the  great  achievements  of  the  inventors  and  engineers 
whom  it  has  been  our  good  fortune  to  have  had  working  in  our 
interests  in  the  fields  of  discovery  and  engineering,  but  for  the 
purpose  of  impressing,  more  especially  upon  the  younger  men 
connected  with  our  organization,  the  great  importance  of  the 
commercial  side  of  the  business  and  to  point  out  to  them  the 
advantage,  alike  to  themselves  and  the  business  itself,  of  their 
bestowing  upon  the  commercial  side  of  the  business  as  much 
thought,  if  not  a  greater  amount  of  thought,  as  that  which  they 
bestow  upon  the  technical  operation  and  construction  side  of 
central-station  development. 

As  a  manager  of  central-station  properties  it  is  often  brought 
home  to  me  that  while  it  is  comparatively  easy  to  obtain  first- 
class  operating  assistance,  and  while  it  is  not  a  matter  of  great 
difficulty  to  obtain  engineers  of  constructive  capacity  to  design 
and  build  our  central-station  plants  and  systems,  it  is  a  far 
greater  problem  to  obtain  trained  technical  men  who  have  made 
a  thorough  study  of  commercial  conditions  to  take  part  in  the 
commercial  development  of  the  business.  I  am  inclined  to 
think  that  if  during  the  next  quarter  of  a  century  we  are  to 
make  relatively  as  great  progress  in  the  development  of  the 
central-station  business  as  has  been  made  in  the  last  quarter  of  a 
century,  it  will  be  necessary  for  the  technical  institutions  of  the 
country  to  give  greater  prominence  to  the  commercial  side  of 
the  central-station  business  and,  when  qualifying  their  students 
in  electrical  engineering  and  mechanical  engineering,  to  teach 
them  more  of  the  true  conditions  governing  commercial  de- 
velopment. 

To  the  young  engineers  engaged  on  the  operating  side  of  the 
business  my  advice  is  that  they  familiarize  themselves  with  the 
commercial  conditions  under  which  the  companies  for  which 
they  work  have  to  conduct  their  business.  If  they  will  give 
thought  to  the  commercial  side  of  the  business  and  qualify 


152  ADDRESSES  OF  SAMUEL  INSULL 

themselves  to  take  part  in  the  sale  of  the  product  of  the  com- 
pany, if  they  will  devise  new  methods  of  selling  the  product,  new 
methods  for  obtaining  consumers  of  the  energy  produced  by 
the  central  station,  they  will  stand  a  chance  of  achieving  dis- 
tinction and  profit  far  greater  than  most  of  them  can  achieve  in 
the  operating  and  purely  engineering  side  of  the  business. 

WHAT  ARE  THE  REAL  FUNCTIONS  OF  A  CENTRAL  STATION? 

The  possibilities  of  central-station  business,  while  great 
today,  must  be  far  greater  in  the  future;  and  in  trying  to  point 
out  what  those  possibilities  are  it  may  not  be  amiss  to  discuss 
what  is  the  real  function  of  a  central-station  company.  Is  it 
simply  to  light  the  streets  of  the  city,  as  most  of  the  electric- 
lighting  companies  thought  was  their  function  twenty -five  years 
ago?  Is  it  merely  to  do  house-to-house  lighting,  as  was  (with 
the  incidental  power  connected  with  it)  the  business  inaugurated 
by  the  few  Edison  companies  a  little  more  than  twenty-five 
years  ago?  Should  a  central-station  company  be  engaged 
merely  in  production  of  power  for  industrial  purposes,  or  for 
railway  purposes  —  whether  the  railway  be  urban,  interurban, 
state  or  interstate?  Or  should  the  central-station  company 
embrace  all  of  the  functions  stated  above  and  produce  all  of  the 
electrical  energy  needed  in  a  given  community  or  a  given  area? 

The  maximum  load  of  the  electric-lighting  business  in  this 
latitude  comes  in  December  and  is  accentuated  by  the  industrial 
power  load.  The  maximum  load  of  the  street-railway  business 
comes  more  often  in  January  than  in  December,  especially  in  the 
Central  West,  owing  to  the  conditions  of  temperature,  involving 
heating  as  well  as  traction.  The  maximum  load  of  the  steam- 
railroad  business,  so  far  as  I  have  been  able  to  figure  it,  comes  in 
the  middle  of  the  summer  in  Connecticut  and  Massachusetts, 
towards  the  end  of  September  around  New  York  city,  and  in 
October  around  Chicago  and  St.  Louis.  The  maximum  load 
of  a  waterworks  comes  in  a  great  many  instances,  if  ample 
storage  is  at  an  elevation,  at  the  convenience  of  the  producer; 
and  in  any  event,  it  comes  at  a  time  of  the  year  when  the  de- 


COMMERCIAL  DEVELOPMENT  153 

mand  for  total  energy  used  in  a  given  community  for  other 
purposes  is  by  no  means  at  its  maximum. 

Why  should  all  these  operations  for  the  production  of  energy 
be  dealt  with  on  a  separate  basis?  Why  not  concentrate  them 
all,  and  by  so  doing  get  low  cost  of  production,  low  capital 
investment  (because  of  the  elimination  of  duplication  of  in- 
vestment) and  increased  diversity  of  demand  for  energy,  and, 
what  is  of  vast  importance,  consequent  low  prices  to  all  users, 
whether  they  be  the  occupant  of  a  simple  cottage,  spending 
fifteen  or  twenty  dollars  a  year  for  light,  or  a  large  railway 
system  using  fifty  or  seventy-five  thousand  kilowatts  of  energy. 

What  I  am  advocating  is  merely  the  extension  of  the  central- 
station  idea.  It  is  applying  the  same  principle,  on  a  very  large 
scale,  which  underlies  our  business,  which  is  the  advantage  of 
increasing  the  diversity  of  the  demand  and  increasing  the 
quantity  of  the  output. 

If  you  will  apply  the  arguments  that  you  use  to  persuade  a 
possible  customer  to  give  up  his  isolated  plant  to  the  larger 
questions  of  manufacturing  and  distributing  electrical  energy, 
you  must  come  to  the  conclusion  that  our  true  function  as 
central-station  companies  is  not  only  to  supply  the  energy 
required  in  the  community  in  which  we  live,  but  also  to  supply 
the  energy  required  to  carry  us  to  the  next  community  when 
we  go  to  visit  our  neighbor,  or  in  any  case  to  carry  us  part  way. 

It  seems  to  me  that  the  development  upon  these  lines 
must  in  the  future  inevitably  occur.  Already  we  have  areas 
in  the  eastern  and  central  western  states  where  the  'extreme 
distance  of  territory  from  one  end  to  the  other,  exceeding  fifty 
or  sixty  miles,  is  served  from  one  distributing  system.  These 
areas  are  far  exceeded  on  the  Pacific  Coast,  where  large  water- 
power  combined  with  steam  stations  serve  a  large  extent  of 
territory  with  central-station  service. 

A  few  months  ago  the  vice-president  of  the  New  York, 
New  Haven  and  Hartford  Railroad,  before  one  of  the  official 
bodies  of  Massachusetts,  said  that  in  his  opinion  within  the 
next  fifteen  years  the  New  Haven  Railroad,  between  New  York 
and  Boston,  would  be  electrified  throughout,  and  the  towns  on 


154  ADDRESSES  OF  SAMUEL  INSTILL 

the  way  would  have  the  opportunity  of  obtaining  electrical 
energy  at  a  very  low  cost,  the  cost  dependent  upon  the  cost  to 
the  railway  company,  which,  in  his  opinion,  would  necessarily 
be  low  because  of  the  very  large  amount  of  business  that  they 
would  have  of  their  own. 

POSSIBLE  ELECTRIFICATION  OF  STEAM  RAILROADS 

The  work  of  the  New  York  Central  and  Pennsylvania  rail- 
roads in  the  way  of  electrification  has  gone  hand  in  hand  with 
the  work  of  the  New  York  and  New  Haven  Railroad,  and  if  the 
steam-railroad  people  look  forward  to  electricity  being  supplied 
at  very  low  cost  throughout  Connecticut,  Massachusetts  and 
Rhode  Island,  as  a  result  of  the  production  of  energy  in  large 
quantities  for  the  electrification  of  the  steam  railroads  in 
those  states,  the  same  thing  must  necessarily  happen  throughout 
the  whole  of  the  densely  settled  portion  of  the  United  States, 
if  the  reasoning  of  the  vice-president  of  the  New  York,  New 
Haven  and  Hartford  Railroad  be  correct. 

But  it  would  seem  to  me  that  our  function  as  producers  of 
electrical  energy  should,  with  the  tendency  towards  electrifica- 
tion of  steam  railroads,  become  very  much  broadened;  and  in- 
stead of  its  being  the  exception,  as  it  is  today,  for  a  central- 
station  company  to  cover  any  large  amount  of  territory  outside 
of  the  municipality  in  which  it  is  mainly  established,  its  op- 
erations will  become  far  more  extensive.  If  the  steam-railroad 
men  of  the  country  want  electrical  energy  produced  economi- 
cally, they  should  find  it  to  their  advantage  to  come  to  us  as 
specialists  in  the  manufacture  of  electrical  energy,  taking  ad- 
vantage of  our  experience  in  the  best  methods  to  pursue,  taking 
advantage  of  combining  their  necessities  for  electrical  energy 
with  the  necessities  existing  in  the  communities  in  which  we 
operate,  which  combination  will  result  in  economies  which 
neither  can  obtain  separately.  This  will  lead  to  the  establish- 
ment of  large  central-station  plants  capable  of  supplying  all 
the  requirements  in  the  way  of  electrical  energy  for  a  large 
area  of  territory  surrounding  the  centers  of  population. 


COMMERCIAL  DEVELOPMENT  155 

If  our  members  will  do  their  share  towards  working  to  such 
a  desirable  end,  the  possibilities  of  electrification  of  steam  rail- 
roads will  be  brought  much  nearer  to  us.  The  financial  burden 
of  making  the  change  would  be  divided,  the  steam  railroad  pro- 
viding the  necessary  capital  for  electrifying  its  right-of-way  and 
changing  its  rolling  stock,  the  central-station  companies  of  the 
country  providing  the  capital  for  building  the  large  generating 
stations  and  transmission  lines  to  convey  the  electrical  energy 
to  the  railroads  and  other  consumers  along  the  right-of-way. 

REGULATION  AND  MONOPOLY 

Before  closing  my  remarks  I  desire  to  refer  to  the  relation 
which  the  central-station  business  bears  to  the  communities 
hi  which  we  operate.  The  business  in  which  we  are  engaged 
can  be  most  successfully  operated  as  a  monopoly  business. 
If  the  communities  which  we  serve  are  to  get  electrical  energy 
at  the  lowest  possible  cost,  they  can  only  expect  to  achieve  this 
by  preventing  duplication  of  investment  and  by  concentrating 
production  under  one  organization.  The  fact  that  low  prices 
cannot  be  permanently  obtained  by  the  old  method  of  encourag- 
ing competition  is  being  very  generally  recognized  today;  and 
as  this  becomes  more  and  more  recognized,  the  regulation  of  our 
business,  our  methods  of  conducting  it,  our  methods  of  financing, 
will  be  subject  more  and  more  to  governmental  supervision  in 
some  form  or  other. 

This  demand  for  supervision,  while  it  certainly  is  a  trend 
of  the  times,  is  also  an  appreciation  on  the  part  of  the  people 
of  this  country  that  the  destructive  effect  of  competition  in 
public-service  business  ultimately  means  greater  burdens  on 
the  community  through  the  maintenance  of  high  rates  to  give  a 
return  on  the  excessive  capital  tied  up  as  a  result  of  duplications 
of  plant.  Fortunately  for  us,  living  as  we  do  in  a  country 
having  had  tremendous  developments  and  capable  of  almost 
unlimited  development  in  the  future,  this  policy  of  competitive 
regulation  has  had  a  limited  effect  only,  as  the  growth  in  the 
communities  in  which  we  operate  and  the  fact  that  our  business 


156  ADDRESSES  OF  SAMUEL  INSULL 

has  by  no  means  reached  a  point  of  saturation  in  the  large  and 
small  cities  of  the  country  have  enabled  us,  from  increased 
business,  to  absorb  and  bring  into  active  use  a  great  deal  of  the 
capital  which  during  the  period  of  competition  seemed  to  be  an 
unnecessary  waste. 

It  should  be  borne  in  mind  that  the  more  closely  our  business 
is  supervised  and  regulated  the  greater  are  the  chances  of  our 
being  protected  against  ruinous  competition,  which  today  is 
mainly  instigated  by  those  who  desire  to  take  this  means  of 
acquiring  our  existing  business.  While  we  may  not  care  to  be 
hampered  by  the  rules  and  regulations  established  by  com- 
missions created  to  watch  over  our  operation,  the  further  these 
commissions  go  into  our  business  the  more  will  they  be  con- 
vinced that  the  best  results  can  be  obtained  only  by  regulated 
monopoly,  and  that  competition  is  alike  as  ruinous  in  the  long 
run  to  our  customers  as  it  is  to  the  central-station  company 
itself.  The  result  will  be  that  our  monopoly  of  the  business 
will  be  secured,  our  securities  will  stand  in  higher  credit  and 
new  capital  will  come  flowing  into  our  coffers  for  the  extension 
of  our  business.  I  do  not  myself  view  with  any  alarm  the 
proper  regulation  of  the  business  in  which  we  are  engaged,  but 
feel  that  its  stability  may  be  greatly  increased  thereby. 

FRIENDLY  RELATIONS  WITH  CUSTOMERS 

There  is  another  phase  of  our  relations  with  the  community 
which  all  of  us  should  do  our  best  to  foster.  I  refer  to  a  friendly 
feeling  of  relationship  between  the  public-service  corporation 
and  its  customers.  As  a  rule  the  tax  collector  is  not  supposed 
to  be  popular;  and  many  people  look  upon  payments  which 
come  regularly  every  month  for  the  use  of  a  public  utility  as 
more  or  less  in  the  form  of  taxation;  but  I  do  think  that  it  is 
possible  for  a  central-station  manager,  by  liberal  methods  of 
dealing  with  his  customers  and  by  absolute  fairness  whenever 
there  is  a  matter  in  dispute,  to  encourage  a  feeling  of  friend- 
liness towards  the  corporation  which  will  build  up  a  valuable 
asset  in  the  shape  of  good  will. 


COMMERCIAL  DEVELOPMENT  157 

Unfortunately,  in  the  last  few  years  there  have  been  a 
number  of  people  engaged  in  arousing  a  spirit  of  hostility  to  the 
corporate  interests  of  the  country.  I  do  not  refer  alone  to 
corporate  interests  running  natural  or  artificial  monopolies,  for 
this  agition  has  been  directed  as  much  against  the  mercantile 
business  run  on  a  large  scale  in  the  form  of  a  corporation  as 
against  the  public-utility  corporation,  whether  municipal, 
state  or  interstate.  A  great  many  of  the  people  engaged  in 
this  class  of  agitation  have  done  it  to  serve  their  own  particular 
ends;  others,  highminded  and  honest  citizens,  have  thought 
that  the  interests  of  the  state  were  menaced  by  corporate 
monopolies  and  that  only  by  agitation  could  these  interests 
be  preserved. 

But  no  little  damage  has  been  done  to  the  corporate  in- 
terests of  this  country  by  the  action  of  some  officials  of  cor- 
porations, who  seem  to  have  had  much  concern  for  the  profit 
of  the  moment  and  little  or  no  concern  for  the  permanency  of 
their  investment  in  the  future.  We  central-station  managers 
ought  to  look  upon  ourselves  as  semi-public  officials  and  so 
conduct  our  affairs  with  the  community  as  to  give  us  the  ad- 
vantage of  a  reputation  for  absolutely  fair  and  impartial  deal- 
ing. We  should  preach  the  same  doctrine  to  our  subordinates 
and  insist  upon  the  same  policy  being  carried  out  in  their  deal- 
ings with  the  public.  If  such  a  course  is  pursued,  we  will  not 
only  be  helping  to  improve  the  opinion  of  the  community  of 
corporations  generally,  but  will  be  establishing  our  own  business 
on  so  firm  a  basis  as  to  add  to  the  permanency  of  our  investment 
and  give  promise  of  prosperity  in  the  future. 


EMPLOYEES  URGED  TO  STUDY  ECONOMIC 
QUESTIONS1 

ONE  OF  the  greatest  pleasures  that  a  busy  man  can 
possibly  enjoy  is  the  good  will  of  those  associated  with 
him.  No  greater  pleasure  is  ever  afforded  me  than  to 
meet  with  those  whom  it  is  my  privilege  to  work  with  and  to 
lead  in  this  great  enterprise  of  electricity  supply  which  we 
have  been  engaged  hi  developing  during  the  last  two  decades. 

Before  saying  anything  about  our  own  business,  I  want  to 
say  a  few  words  to  you  about  the  National  Electric  Light 
Association.  The  National  association  is  the  leading  body 
in  every  respect  in  this  great  industry,  representing  a  capital 
of  upwards  of  a  billion  and  a  quarter  of  dollars,  and  its  influence 
is  felt  in  every  community,  an  influence  exercised  alike  for  the 
good  of  the  communities  in  which  our  member  companies 
operate  and  for  the  benefit  of  the  companies  themselves. 

If,  in  going  to  different  parts  of  the  country  to  look  into 
some  electric  properties,  you  happen  to  find  a  property  that  is 
run  down  at  heel,  with  plant  in  relatively  poor  condition,  whose 
organization  is  at  odds  with  the  community  with  which  it  has 
to  do  business,  and  whose  methods  of  business  are  ten  years 
behind  the  times,  you  can  be  pretty  sure  that  that  company  is 
not  a  member  of  the  National  Electric  Light  Association.  If 
that  company  were  a  member  of  the  association,  and  if  its 
officials  attended  the  national  conventions  and  took  advan- 
tage of  the  accumulation  of  information  produced  by  the  best 

1.  Mr.  Insull  has  been  an  earnest  advocate  of  co-operation  in  the  electrical 
industry,  both  in  the  larger  sense,  as  represented  by  the  national  societies,  and 
in  his  own  organizations.  In  particular  he  has  been  a  warm  friend  of  the  Na- 
tional Electric  Light  Association,  and  he  has  given  the  company  sections  of  that 
organization  every  encouragement.  The  address  given  here  was  delivered  at 
the  annual  meeting  and  dinner  of  the  Commonwealth  Edison  Company  Section 
of  the  National  Electric  Light  Association  in  Chicago  on  November  1,  1910. 

158 


INTERESTS  OF  EMPLOYEES  159 

brains  of  this,  one  of  the  foremost  industries  of  our  times,  it 
would  not  be  possible  for  such  a  company  as  I  have  spoken 
of  to  be  satisfied  with  the  results  achieved. 

ADVANTAGES  OF  MEMBERSHIP  IN  COMPANY  SECTIONS 

The  development  that  has  taken  place  in  the  last  two  or 
three  years  leading  to  the  establishment  of  the  company 
branches  or  sections  of  the  association  must  finally  place  the 
men  who  fail  to  recognize  the  benefits  that  they  can  obtain  by 
becoming  members  of  the  company  sections  in  relatively  the 
same  position,  so  far  as  their  own  company  is  concerned,  as  is 
occupied  by  the  electricity-supply  companies  that  fail  to  rec- 
ognize the  noteworthy  benefits  of  joining  this  association.  I 
cannot  urge  upon  you  too  strongly,  I  cannot  urge  upon  those 
who,  unfortunately,  are  not  in  this  room,  and  who  are  connected 
with  the  Commonwealth  Edison  Company,  the  benefit  that 
they  can  obtain,  the  absolutely  necessary  knowledge  that  they 
can  obtain,  if  they  will  profit  by  the  advantages  that  can  be  ob- 
tained from  membership  in  the  company  section  here  in  Chicago. 

I  was  very  much  struck  with  the  remarks  of  your  incoming 
chairman,1  his  reference  to  the  low  percentage  of  members  of 
this  branch  who  have  left  our  company's  service,  and  his  refer- 
ence to  the  fact  that  the  members  of  this  branch  enjoy  a  higher 
average  pay  than  the  non-members  of  this  branch,  working 
for  the  Commonwealth  Edison  Company.  It  is  pretty  good 
evidence  that  the  best  brains  of  the  company  are  represented 
in  this  room.  I  am  not  given,  as  you  know,  to  throwing 
bouquets;  but  the  very  best  way  that  you  can  fit  yourselves  for 
positions  higher  up  in  this  great  industry,  positions  which  are 
open  to  all  of  you,  just  as  much  as  they  have  been  open  to  me 
and  to  the  other  gentlemen  sitting  at  this  table  —  the  very 
best  way  that  you  can  fit  yourselves  for  future  advancement, 
enabling  you  to  deal  not  only  with  the  particular  work  that  you 
are  doing  at  the  moment,  but  with  work  of  much  greater  conse- 
quence, and  consequently  bringing  much  greater  pay;  the 

1.  Mr.  Ernest  F.  Smith,  superintendent  of  substations  for  the  Common- 
wealth Edison  Company. 


160  ADDRESSES  OF  SAMUEL  INSULL 

very  best  way  that  you  can  fit  yourselves  for  such  positions  and 
be  candidates  for  advancement  in  our  company  organiza- 
tion —  is  to  devote  yourself  to  the  work  which  is  before  you  in 
the  Commonwealth  Edison  Company  Section  of  the  National 
Electric  Light  Association. 

This  is  the  twenty-sixth  year  of  the  existence  of  the  National 
Electric  Light  Association.  I  well  remember  attending  a  meet- 
ing some  twenty-four  years  ago  in  the  old  Grand  Pacific  Hotel, 
when  it  was  impossible  to  muster  more  than  about  one-sixth 
of  the  number  in  this  room  tonight  as  representatives  from  all 
over  the  country  of  the  great  industry  with  which  we  are  associ- 
ated. And  in  recalling  that  occasion,  I  cannot  refrain,  at  the 
cost  of  the  reiteration,  of  rendering  my  tribute  to  the  enormous 
influence  that  this  association  has  had  on  our  industry;  to 
the  broadening  effect  that  it  has  had  on  all  of  us  who  have 
attended  the  national  conventions,  and  to  the  vast  amount  of 
information  that  we  have  obtained  by  the  exchange  of  ideas 
and  the  discussion  of  those  ideas  as  to  the  best  way  of  operating 
the  business. 

I  rather  think  that  we  plume  ourselves  too  much  on  the 
number  we  have  in  the  Commonwealth  Edison  Section  of  the 
National  association.  A  very  good  test  of  the  number  of  mem- 
bers we  ought  to  have  would  probably  be  the  numbers  of  em- 
ployees of  the  Commonwealth  Edison  Company  who  have  the 
right  to  join  our  savings  fund.  At  the  present  time  we  have 
on  our  payrolls  over  2,000  men  who  have  been  with  us  upwards 
of  a  year,  and  consequently  have  the  right  to  join  that  fund. 
And  yet  only  485  of  those  men  have  recognized  the  benefits 
that  they  can  gain  by  becoming  members  of  the  company 
section. 

THE  BEST  INVESTMENT  A  MAN  CAN  MAKE 
Mr.  Freeman1  has  very  kindly  referred  to  the  Common- 
wealth Edison  Company  as  the  premier  organization  of  its 

1.  Mr.  W.  W.  Freeman,  who  was  a  guest  at  the  dinner,  was  then  the 
president  of  the  National  Electric  Light  Association.  For  a  number  of  years 
Mr.  Freeman  was  vice-president  and  general  manager  of  the  Edison  Electric 
Illuminating  Company  of  Brooklyn.  In  1914  he  became  president  of  the 
Union  Gas  and  Electric  Company  of  Cincinnati. 


INTERESTS  OF  EMPLOYEES  161 

kind  the  world  over.  I  think  his  kindness  in  that  respect  is  a 
little  exaggerated,  but  still  we  will  accept  the  compliment  as 
blushingly  as  we  may,  Mr.  Freeman.  Now,  if  we  are  the  pre- 
mier organization  —  anyway  we  will  accept  it  for  the  purpose 
of  argument  —  if  we  are  the  premier  organization  in  the  elec- 
tricity-supply business,  it  is  but  natural  that  we  should  have  the 
premier  organization  as  a  section  of  the  National  Electric 
Light  Association.  Instead  of  being  satisfied  with  only  a  little 
over  20  per  cent  of  the  employees  of  our  company  as  members 
of  this  organization,  we  should  not  be  satisfied  until  we  can 
get  every  man  who  is  qualified  to  join  our  savings  fund  as  a 
member  of  this  company  section. 

It  matters  not  whether  a  man  is  in  the  contract  department, 
or  in  the  operating  department,  or  the  auditing  department  — 
the  employees  of  all  departments  can  obtain  much  benefit  by 
the  knowledge  that  they  would  get  of  other  branches  of  the 
business  if  they  would  become  members  in  this  company  section. 

I  hope  when  we  meet  again  a  year  from  now  that  our  mem- 
bership will  be  doubled.1  It  certainly  ought  to  be.  The  men 
who  have  the  right  to  join  the  section  can  well  afford  to  do  it 
from  a  financial  point  of  view.  It  is  the  best  possible  invest- 
ment they  can  make,  as  I  naturally  assume  that  all  of  them 
hope  to  get  along  and  rise  to  positions  of  authority  in  this 
business  either  here  in  Chicago  or  elsewhere.  So  much  for 
the  company  section. 

SOME  STATISTICS  OF  TEN  YEAKS'  GROWTH 
I  was  casting  around  this  afternoon,  or  rather  yesterday 
afternoon,  for  something  on  which  to  pin  my  speech  here  this 
evening,  and  one  of  my  very  kind  assistants  reminded  me  that 
at  a  dinner  of  the  employees  of  the  old  Chicago  Edison  Company, 
held  at  Henrici's  old  restaurant  on  Adams  Street,  some  ten 
years  ago,  I  made  the  statement  that  it  was  not  at  all  beyond 
the  range  of  possibilities  that  the  corporation  with  which  we 
are  all  connected,  and  justly  proud  of  being  connected  with, 
would  some  day  have  invested  in  its  business  upwards  of  a 

1.  It  was  more  than  doubled  at  that  time.  See  "Opportunity  for  Ad- 
vancement," page  234. 


162  ADDRESSES  OF  SAMUEL  INSULL 

hundred  millions  of  dollars,  and  I  even  ventured  the  statement 
that  the  Harrison  Street  generating  station,  which  at  that 
time  was  probably  the  first  or  second  generating  station  in 
the  country,  would  ultimately  become  a  substation.  And 
our  genial  secretary  and  treasurer,1  who  heard  the  remark, 
reminded  me  that  about  the  same  time  I  made  a  similar  remark 
at  a  meeting  of  the  board  of  directors  of  the  old  Edison  com- 
pany, and  when  I  intimated  that  I  thought  we  might  at  some 
time  have  employed  in  our  business  a  sum  equal  to  a  hundred 
millions  of  dollars,  some  of  the  directors  looked  askance  and 
wondered  whether  my  reason  was  a  little  affected. 

Now,  what  have  we  done  in  the  period  that  has  gone  by 
since  that  pleasant  little  dinner  we  had  at  Henrici's?  I  have 
had  some  figures  gathered  together  here  which  I  thought  would 
interest  you  as  showing  the  growth  of  our  business. 

Our  connected  load  expressed  in  16-candlepower  equivalents 
in  the  year  1899  was  769,115  lamps;  in  the  year  1910,  expressed 
the  same  way,  it  amounts  to  8,143,908  lamps.  In  1900  we 
had  13,919  customers  and  in  1910  we  have  124,607  customers. 
The  maximum  load  in  1900  was  14,260  kilowatts,  or  was  a  little 
over  19,000  horse-power;  our  maximum  load  last  winter  was 
158,000  kilowatts,  a  little  over  211,000  horse-power.  Our 
maximum  load  this  winter  will  probably  run  up  to  185,000 
kilowatts,  a  little  over  240,000  horse-power. 

Our  kilowatt-hours  generated  in  1900  were  34,370,000 
kilowatt-hours,  an  amount  which  we  do  not  think  much  of 
billing  to  one  customer  at  the  present  time.  Our  kilowatt- 
hours  generated  for  the  fiscal  year  just  closed,  to  the  end  of 
September,  were  601,712,335  kilowatt-hours,  a  greater  output 
than  that  generated  in  any  city  of  the  world,  even  in  the  great 
city  of  London,  with  its  six  millions  of  people  and  covering  an 
area  almost  the  equivalent,  I  think,  of  one  of  the  smaller  states 
of  the  Union.  In  1900  we  had  nine  generating  stations  run- 
ning. Today  we  have  three  generating  stations  running,  and 
I  suppose  one  of  those  will  inevitably  go  out  of  use  within  the 
next  few  years. 

1.  Mr.  William  A.  Fox,  made  vice-president  of  the  company  in  1914. 


INTERESTS  OF  EMPLOYEES  163 

In  1900  our  load  factor,  which,  after  all,  is  the  controlling 
element  in  the  question  of  making  or  losing  money,  rather  than 
the  selling  at  a  high  price  or  at  a  low  price  —  our  load  factor 
was  a  little  under  29  per  cent.  In  1910  our  load  factor  was  a 
little  over  41  per  cent.  In  1900  our  gross  earnings  were  $2,- 
650,058,  and  for  the  year  ended  September,  1910,  they  were 
$13,083,725.  The  total  money  employed  in  our  business  in 
1900  was  $14,391,971,  and  the  amount  of  money  employed  in 
our  business  at  the  present  time  is  $67,500,000.  In  these  days 
when  so  much  is  said  about  corporations  not  bearing  the  bur- 
dens which  they  ought  to  bear,  I  deem  the  item  of  taxes  which 
we  pay  —  on  personal  property  and  real  estate,  Federal  taxes 
and  compensation  to  the  city  —  as  one  of  the  most  important 
in  our  business.  In  1900  our  taxes  and  municipal  compensa- 
tion amounted  to  $90,773.  In  the  year  just  closed  these  items 
amounted  to  $968,262. 

If  you  will  make  a  comparison  of  our  figures  with  those  of 
other  companies,  I  do  not  think  it  is  stretching  the  facts  to  say 
that  we  have  about  a  third  more  customers  than  the  largest 
company  of  this  country.  We  put  out  about  a  third  more 
kilowatt-hours,  and  we  receive  for  it  about  a  third  less  dollars. 
I  think  that  statement  is  the  best  that  I  can  make  as  to  what 
we  are  doing  for  the  community  in  which  we  operate. 

Remember,  if  we  are  looking  for  success,  if  we  are  looking 
forward  in  the  future  to  greater  increases  in  our  business,  to  a 
greater  security  for  the  capital  employed  in  it,  we  can  only  get 
that  success  and  get  that  security  by  serving  the  community 
hi  which  we  live,  fairly,  honestly  and  economically.  If  we 
pursue  the  policy  of  dealing  fairly  with  the  community,  I  have 
no  doubt  that  the  figures  that  I  have  named  will  be  far  exceeded 
in  the  future,  away  beyond  anything  that  we  have  expected 
in  the  past. 

POSSIBILITIES  OF  THE  FUTURE 

What  I  have  had  to  say  about  the  possibility  of  membership 
in  this  section  of  the  National  Electric  Light  Association  and 
the  fact  that  we  probably  pride  ourselves  a  little  too  much  on  our 


164  ADDRESSES  OF  SAMUEL  INSULL 

having  the  largest  section  applies  equally  to  the  business  of  the 
corporation  for  which  we  are  all  working.  As  near  as  I  can 
figure,  from  the  information  obtained  for  me  by  our  statistical 
department,  the  possibility  of  growth  in  the  future  is  so  great 
that  I  am  inclined  to  think  that  our  optimistic  friend,  the  chief 
operating  engineer,  Mr.  W.  L.  Abbott,  will  have  to  jack  up  his 
figures.  I  believe  that  if  we  had  all  the  business  that  it  is 
possible  to  do  in  this  community  at  the  present  time  with  the 
present  population  that  we  have  in  this  city,  it  would  be  quite 
possible  to  do  a  business  of  about  600,000  kilowatts  of  maximum 
demand.  The  field  that  is  open  to  us  today  (and  that  is  a 
subject  which  every  one  of  you  individually  is  very  greatly 
interested  in)  is  to  my  mind  three  times  as  large  as  the  field 
we  actually  occupy.  I  do  not  mean  to  say  that  we  can  ever 
expect  to  get  one  hundred  per  cent  of  the  possible  business, 
but  that  ought  to  be  the  high  mark,  the  goal  which  we  should 
attempt  to  attain.  If  we  ever  can  achieve  that  position,  it 
will  be  greatly  to  the  benefit  of  every  one  of  you,  just  as  much 
as  it  would  be  to  the  benefit  of  myself  and  those  more  closely 
associated  with  me,  and  just  as  much  as  it  would  be  to  the 
benefit  of  those  who  provide  the  capital,  and  provide  it  so 
liberally,  to  enable  us  to  operate  on  the  large  scale  on  which  we 
are  operating  in  this  city. 

LABOR  AND  CAPITAL  PAID  ABOUT  EQUALLY 

That  brings  me  to  another  subject,  and  that  is,  What  be- 
comes of  the  money  that  we  spend?  How  much  of  it  in  the 
form  of  wages  goes  to  you  and  to  me  and  the  other  employees 
of  the  Edison  Company,  and  how  much  of  it,  in  the  form  of 
interest  and  dividends,  goes  to  those  who  provide  the  capital 
to  develop  the  business?  Capital  is  entitled  to  its  wages  in 
the  shape  of  interest  and  dividends  just  as  much  as  labor  is 
entitled  to  be  paid  in  the  shape  of  wages  or  salaries. 

For  the  year  ended  September  30,  as  I  have  just  told  you, 
our  total  income  amounted  to  $13,083,725.  In  the  same  time 
we  invested  nearly  six  millions  of  dollars  in  new  plants.  During 


INTERESTS  OF  EMPLOYEES  165 

that  time  we  paid  out  for  labor  directly  from  the  company  and 
through  our  contractors  who  do  our  construction  work  the  large 
sum  of  $3,250,000.  During  the  same  period,  we  paid  out  for 
dividends  and  interest  $3,114,000. 

Now,  if  any  one  of  you  were  proposing  to  start  in  business  for 
himself,  the  class  of  business  being  such  that  the  labor  in  it 
could  all  be  performed  by  yourself,  and  if  some  capitalist  came 
along  and  told  you  that  he  would  provide  you  with  capital, 
providing  that  you  would  take  your  pay  in  one-half  of  the 
profits  and  he  would  take  his  pay  for  the  use  of  his  money  in  one- 
half  of  the  profits,  you  would  consider  that  a  pretty  liberal 
proposition.  That  is  practically  the  condition  under  which 
this  great  business  is  operated.  On  the  one  hand  we  have  about 
3,000  employees;  on  the  other  hand  we  have  about  seventy 
millions  of  dollars  invested  in  our  business.  After  paying 
operating  expenses,  that  is,  after  paying  for  material,  after 
paying  about  $1,400,000  for  coal,  about  $1,000,000  for  taxes 
and  compensation  and  large  sums  for  other  classes  of  material, 
the  employees  receive  about  one-half  of  what  is  left  —  a  little 
more  than  one-half.  They  receive  $3,250,000.  The  capital 
employed  in  the  business  receives  for  its  wages  (and,  as  I  have 
stated,  money  is  just  as  much  entitled  to  be  paid  its  wages  as 
labor  is)  a  little  less  than  you  do;  it  receives  $3,114,000.  So 
you  get  about  one-half  of  the  net  results. 

EMPLOYEES  SHOULD  STUDY  ECONOMIC  QUESTIONS 

Now,  what  does  this  mean?  It  means  that  anything  that 
will  work  an  injury  to  capital  works  an  injury  just  as  much  to 
labor.  I  am  inclined  to  think  the  figures  that  I  am  using  would 
probably  apply  to  every  large  electricity-supply  company  the 
world  over.  I  think  you  will  find  that  labor,  as  a  rule,  gets 
just  about  one-half  of  the  net  results.  In  other  words,  the 
capitalist  puts  his  money  into  the  business  and  he  takes  his 
pay  in  one-half  of  the  profits,  and  he  gives  to  labor  the  other 
half  of  the  profits. 

This  should  bring  home  to  every  one  of  us  —  not  alone 


166  ADDRESSES  OF  SAMUEL  INSULL 

to  the  president  of  the  company,  or  the  vice-president  of  the 
company,  but  to  every  man  engaged  in  the  organization,  right 
down  to  the  lowliest  employee — the  absolute  necessity,  if  he 
wants  to  protect  his  own  interests,  of  working  in  season  and  out 
out  of  season,  not  alone  at  his  desk  in  the  office,  or  in  a  generat- 
ing station,  or  a  substation,  but  everywhere  he  goes.  If 
he  wants  to  serve  his  own  interests,  or,  to  bring  it  down  to  a 
little  more  homely  statement,  if  he  wants  to  protect  his  own 
pocket,  he  should  study  the  questions  governing  the  control 
and  the  regulation  of  the  corporation  for  which  he  is  working. 
In  work  time  and  in  play  time  he  should  do  whatever  he  can  to 
shape  public  opinion,  to  persuade  others  (as  those  who  study 
inside  the  organization  must  be  fully  persuaded)  that  our 
policy,  under  all  circumstances,  is  to  try  to  do  the  fair  thing 
and  the  right  thing  as  between  our  corporation  and  the  great 
community  in  which  it  is  our  privilege  to  do  business. 


SELLING    OF    ELECTRICITY    IN    LONDON 
AND  CHICAGO  COMPARED1 

I  FEEL  somewhat  embarrassed  at  the  introduction  that  Mr. 
Byllesby  has  given  me,  because  it  would  be  natural  to  sup- 
pose that  as  I  had  made  a  special  effort  to  be  here  this  week 
(in  fact,  with  great  regret  I  left  London  a  week  ago  last  Satur- 
day, when  I  had  in  mind  the  meetings  here  and  the  dinner  later 
in  the  week)  I  had  prepared  a  set  speech.     I  have  not  done 
anything  of  the  kind.     I  have  been  away  on  a  holiday,  and 
since  I  returned  last  Saturday  morning  I  have  not  had  a  chance 
to  prepare  a  set  speech. 

I  was  just  leaving  my  friend  Mr.  Herman  H.  Kohlsaat, 
of  the  Chicago  Record-Herald,  at  the  lunch  table,  and  I  told  him 
it  was  ten  minutes  to  two  o'clock  and  I  had  to  start  delivering  a 
speech  at  two  o'clock  and  I  wished  he  would  give  me  some  ideas 
to  talk  on.  The  only  thing  he  could  suggest  was,  "Early  to 
bed,  and  early  to  rise;  work  like  Hades,  and  advertise." 

Now  you  might  ask,  What  has  that  to  do  with  central- 
station  business?  If  people  go  to  bed  early,  perhaps  they  will 
not  consume  much  electricity  for  lighting  purposes.  If  you 
will  get  your  business  into  the  condition  it  should  be  in  —  it 
matters  not  whether  it  is  in  a  large  center  of  population,  like 
New  York,  or  Boston,  or  Chicago,  or  in  a  small  center  of  popula- 
tion —  you  will  be  practically  independent  of  whether  the 
people  go  early  to  bed  or  not.  That  is  our  situation  here  in 
Chicago.  Only  27  per  cent  of  the  energy  that  we  put  out  is 
used  for  lighting  purposes,  so  it  is  quite  immaterial  to  us  whether 
they  go  to  bed  early  or  not.  We  are  somewhat  interested  in 

1.  Speech  at  the  second  annual  convention  of  H.  M.  Byllesby  &  Company 
and  affiliated  companies  in  Chicago  on  January  18,  1911.  In  his  introduction 
Mr.  Byllesby  said  that  Mr.  Insull  came  from  London  for  the  especial  purpose 
of  attending  the  convention. 

167 


168  ADDRESSES  OF  SAMUEL  INSULL 

their  rising  early,  because  we  want  the  load  to  start  as  early  in 
the  morning  as  we  possibly  can  get  it. 

On  the  question  of  "working  like  Hades,"  any  man  who 
does  not  want  to  work  —  any  man  who  is  looking  for  the  life 
of  one  "born  with  a  silver  spoon  in  his  mouth" —  had  better  get 
out  of  the  operating  side  of  the  electrical  business,  as  all  such 
men  have  had  to  get  out  of  the  manufacturing  side  of  the 
electrical  business. 

VALUE  OF  NEWSPAPER  ADVERTISING 

On  the  question  of  advertising,  my  friend,  Mr.  Kohlsaat, 
had  in  mind  his  load  factor;  just  as  we  all  have  in  mind  all  the 
time  our  load  factor.  I  do  not  know  any  better  way  to  in- 
crease your  load  factor  than  by  increasing  the  load  factor  of 
your  local  press  by  advertising  very  steadily.  The  result  of 
daily  newspaper  advertising  here  in  Chicago  has  been  largely  to 
increase  the  productive  capacity  of  our  canvassing  force.  It 
is  an  unusual  thing  for  us  to  send  a  canvasser  to  visit  a  possible 
customer  in  the  thickly  settled  portion  of  the  city,  unless  that 
possible  customer  has  either  written  us  or  telephoned  asking 
us  to  send  a  man  to  see  him.  Of  course,  I  do  not  refer  to  the 
larger  business  —  the  obtaining  of  big  industrial  power  busi- 
ness, or  the  very  large  lighting  business,  such  as  shutting  down 
an  isolated  plant;  but  I  refer  to  the  business  obtained  from 
house  to  house.  We  do  not  have  to  send  our  canvassers  to- 
day to  visit  eight  or  ten  houses  before  they  can  discover  a 
possible  customer. 

Daily  newspaper  advertising,  properly  written,  and  per- 
sistently presented  to  the  public,  has  had  the  result  of  so  in- 
creasing the  demand  for  our  product  that  in  the  downtown 
district  and  the  thickly  settled  residence  districts  our  business  is 
obtained  from  people  who  first  invite  us  to  call  on  them.  You 
all  know,  as  sellers  of  goods,  whether  those  goods  be  electrical 
apparatus  or  the  kilowatt-hour,  that  it  is  a  great  advantage  to 
the  seller  to  have  the  purchaser  come  to  him  first.  So  much  for 
Mr.  Kohlsaat's  text  for  me. 


LONDON  AND  CHICAGO  169 

GET  ALL  THE  BUSINESS  IN  THE  COMMUNITY 

I  have  not  any  new  subjects  to  present  to  you.  I  have 
simply  the  same  story  to  repeat  here  that  I  gave  utterance 
to  at  the  last  convention  a  year  ago.  One  thing  for  you  to  aim 
at  all  the  time  is  to  produce  all  of  the  energy  that  is  required  hi 
your  community  for  whatever  purposes  that  energy  may  be 
used;  and  in  aiming  at  that  happy  result  you,  of  course,  have 
got  to  have  a  highly  economical  plant,  which  you  certainly  get 
with  the  engineering  ability  that  is  back  of  you  in  H.  M. 
Byllesby  &  Company.  You  have  got  to  quote  prices  based  on 
the  character  of  the  service  demanded  of  you,  and  thus  invite 
that  class  of  business  that  will  lead  to  the  best  possible  load 
factor  —  that  is,  the  greatest  possible  average  use  of  every 
dollar  invested.  You  have  got  to  get  a  bigger  proportion  of 
the  business  in  the  smaller  cities;  you  have  got  to  give  really 
more  attention  to  scientific  methods  of  selling  your  product. 
There  are  less  possibilities  of  obtaining  business  in  the  smaller 
towns  and  consequently  you  have  got  to  get  all  the  possible 
business  in  a  given  community. 

It  is  an  easy  matter  to  handle  these  things  in  a  very  large 
city,  and  we  who  run  the  large  companies,  in  talking  to  those 
who  run  the  small  companies,  often  fail  to  appreciate  the  greater 
difficulties  that  the  people  in  the  smaller  cities  have  to  deal  with. 
I  myself  would  fail  to  appreciate  it  if  it  were  not  for  the  fact 
that  from  time  to  time  I  have  invested  large  sums  of  money  in 
the  development  of  small  properties  throughout  the  country. 

Here  in  Chicago  our  maximum  load  this  present  winter  is 
practically  270,000  horse-power.  If  we  were  doing  all  the 
business  which  it  would  be  possible  for  us  to  do  in  this  com- 
munity; that  is,  if  we  could  shut  down  all  the  isolated  plants; 
if  we  could  shut  down  all  of  the  power  plants  operating  industrial 
establishments;  if  we  could  shut  down  all  of  the  power  plants 
operating  elevated-railway  service;  if  we  could  transform  the 
terminals  of  the  steam  railroads  into  electric  operation  over 
night  and  dispense  with  steam  locomotives  —  it  would  be 
possible  for  us  in  this  community  to  get  a  load,  with  the  present 


170  ADDRESSES  OF  SAMUEL  INSULL 

population,  of  somewhere  between  750,000  and  1,000,000 
horse-power.  So  you  see  we  can  afford  to  pick  and  choose  our 
business.  Even  leaving  out  the  electrification  of  the  steam 
railroads,  which,  after  all,  would  consume  a  relatively  small 
amount  of  power  as  compared  with  the  operation  of  the  big 
surface  transportation  system  in  a  large  city  —  even  leaving  out 
the  steam  railroads,  there  is  probably  750,000  horse-power  of 
possible  business  within  the  city  limits  of  Chicago.  We  do 
not  have  to  persuade  every  man  that  our  scheme  of  generating 
and  supplying  energy  is  the  best  and  the  cheapest.  As  long 
as  we  get  every  third  man  we  can  do  a  pretty  good  business  and 
can  employ  about  all  the  capital  that  we  can  conveniently 
raise  from  year  to  year. 

FIXED  RELATION  BETWEEN  COST  AND  SELLING  PRICE 

But  that  situation,  as  I  have  said,  does  not  exist  in  the 
smaller  places.  In  order  to  reduce  the  cost  of  energy  to  the 
lowest  possible  figure,  and  consequently  reduce  your  selling 
price,  at  a  profit,  to  the  lowest  possible  figure,  you  should  have 
all  the  business  in  all  the  communities  in  which  you  operate. 
You  should  have  the  pumping  of  the  water,  the  running  of 
the  street-car  lines,  the  city  lighting,  the  domestic  lighting, 
the  running  of  all  the  industrial  establishments  that  you 
may  have  in  the  community  —  in  fact,  all  the  possible 
business  in  your  community.  And  then,  after  you  get  that, 
you  should  go  after  the  business  in  the  next  community,  ten, 
fifteen,  twenty,  or  twenty-five  miles  away,  and  by  a  further 
concentration  of  the  manufacture  of  energy.,  reduce  your  cost, 
and  consequently  later  on  reduce  your  selling  price.  Because, 
after  all,  I  care  not,  gentlemen,  whether  we  are  regulated  by  a 
city  council,  whether  we  are  regulated  by  a  state  commission, 
whether  we  are  regulated  by  that  greater  and  still  more  potent 
force  —  public  opinion  —  there  can  never  be  much  more  than 
about  the  same  relation  between  the  cost  price  and  the  selling 
price. 

As  rapidly  as  you  are  able  to  reduce  your  cost,  either  as  a 


LONDON  AND  CHICAGO  171 

matter  of  self-interest,  or,  if  you  can't  see  your  own  self-in- 
terests, then  as  a  matter  of  compulsion  —  and,  to  my  mind, 
proper  compulsion  —  you  will  have  to  reduce  your  selling  price. 
The  chances  are  that  for  every  saving  that  you  can  make  in  the 
cost  of  production  —  whether  you  get  that  saving  from  con- 
centration of  production  for  a  number  of  small  towns  operated 
from  one  central  plant,  or  whether  you  get  that  saving  in  cost 
of  production  from  the  concentration  of  the  production  of  all  of 
the  energy  required  in  a  given  community  in  one  central 
station  —  you  will  have  got  to  reduce  your  price.  And  it  is 
very  proper  that  you  should  do  so. 

WHAT  MIGHT  BE  DONE  EN  LONDON 

I  do  not  know  of  any  better  instance  of  the  opposite  of 
what  I  have  stated  than  what  is  still  going  on  in  the  great 
city  of  London,  or  rather,  I  would  say,  in  the  county  of  Lon- 
don. The  City  of  London  has  a  very  small  area,  only  about  a 
mile  square.  The  county  of  London  is  more  thickly  populated, 
I  think,  than  the  City,  because  people  do  not  live  in  the  City; 
they  go  there  for  business.  I  think  the  county  of  London  has 
a  population  of  something  like  six  or  seven  millions.  In  the 
county  of  London  there  are  63  different  electricity-supply 
undertakings,  either  privately  owned  corporations  or  munici- 
pally owned  plants,  for  the  production  of  electrical  energy. 
In  addition,  the  underground  railroads  have  their  separate 
source  of  production,  and  the  London  County  Council,  which 
operates  most  of  the  surface  transportation  in  London,  has  its 
separate  source  of  production. 

What  is  the  result?  With  between  six  and  seven  millions 
of  population,  the  output  of  electrical  energy  in  the  county  of 
London  is  about  500,000,000  units  (kilowatt-hours)  a  year.  In 
Chicago,  with  a  population  of  about  2,250,000,  the  output  of 
electric  units  is  about  700,000,000.  The  situation  should  not 
only  be  reversed,  but  instead  of  500,000,000  units  being  pro- 
duced and  sold,  or  used  for  traction  purposes,  within  the 
county  of  London,  there  should  be  at  least  three  times  that 


172  ADDRESSES  OF  SAMUEL  INSTILL 

amount,  or  upwards  of  double  the  amount  of  energy  that  we 
sell  here  in  Chicago. 

What  is  the  reason  for  the  difference?  There  is  probably 
no  better  field  anywhere  in  the  world  than  the  county  of  Lon- 
don for  the  economical  production  of  energy,  and  its  large  sale 
on  a  wholesale  and  retail  basis.  Apart  from  the  requirements 
in  the  ordinary  everyday  life  of  the  six  to  seven  millions  of 
people,  whether  it  be  for  transportation  purposes  or  for  lighting 
purposes,  London  is  the  center  of  a  tremendous  manufacturing 
interest.  This  fortunately,  in  some  respects,  for  its  inhabitants, 
is  largely  in  the  form  of  small  manufacturing  interests  —  a  class 
of  manufacturing  especially  favorable  to  the  central-station 
manager  in  soliciting  business.  On  account  of  the  condition 
of  the  laws  with  relation  to  electric  lighting  and  some  conditions 
as  to  the  acquisition  of  properties  after  the  expiration  of 
franchises,  and  some  conditions  which  permit  small  municipal- 
ities within  the  larger  area  of  London  to  do  their  own  lighting 
business,  they  have  a  very  high  average  cost,  and  consequently 
must  have  a  high  average  selling  price.  I  have  not  at  hand  the 
present  cost  within  the  London  area,  but  the  last  time  I  made 
the  comparison  from  official  government  returns  a  few  years 
ago,  the  average  cost  of  electrical  energy  within  the  area  of 
London  was  about  as  great  as  the  average  income  that  we  get 
here  in  Chicago,  and  we  have  to  pay  interest  on  our  money  and 
make  profits  for  ourselves  out  of  the  price  that  we  get  for  the 
electricity. 

DON'T  GET  DISCOURAGED;  GET  THE  BUSINESS 

Now,  if  that  condition  exists  here,  as  to  low  cost  of  produc- 
tion and  low  selling  price,  and  a  volume  of  consumption  fully 
forty  per  cent  greater  for  a  population  of  about  one-third, 
the  same  conditions  must  exist  in  smaller  places,  if  proper 
attention  is  not  given  to  this  question  of  the  massing  of  produc- 
tion and  of  low  selling  prices.  And  let  me  tell  you  that  low 
selling  prices  and  massing  of  production  mean  a  high  earning 
capacity  for  the  dollar  invested. 


LONDON  AND   CHICAGO  173 

The  story  I  am  telling  is  old  —  a  story  that  you  are  all  very 
familiar  with.  No  one  is  more  familiar  with  it  than  Mr. 
Byllesby.  If  I  were  looking  for  the  fundamental  causes  of  the 
success  of  H.  M.  Byllesby  &  Company,  I  think  I  would  find  it 
in  the  purchase  of  properties  for  which  you  have  to  pay  good 
average  prices,  the  consolidation  of  those  properties,  and,  wher- 
ever it  is  possible,  the  massing  of  the  production  of  the  product 
which  you  sell  so  as  to  produce  at  the  lowest  possible  selling 
price.  As  I  have  said,  I  have  no  new  story  to  preach.  It  is 
simply  to  carry  on  the  same  work  in  the  same  way  that  we  have 
been  going  for  the  last  ten  years,  let  us  say,  because,  after  all, 
the  great  impetus  to  central-station  business  has  taken  place 
since  1900.  The  great  additions  of  capital  invested  in  it  and 
the  stimulus  that  that  has  given  in  vast  extensions  of  the 
business  have  all  taken  place  in  the  last  ten  years. 

The  men  in  this  room  to  whom  I  particularly  wish  to  address 
my  remarks  are  the  men  who  feel  discouraged  at  the  results 
they  are  getting  —  the  men  who  have  low  increases  in  their 
business  as  compared  with  previous  years.  These  are  the  men 
that  I  want  to  reach.  Of  course,  you  may  find  in  isolated 
cases  that  the  fault  is  with  the  community  —  that  the  com- 
munity does  not  grow.  But  I  firmly  believe  that  in  ninety  per 
cent  of  the  cases  where  people  fail  to  obtain  success  in  our  line 
of  business,  the  fault  is  not  with  the  material  that  you  have  to 
deal  with  —  the  fault  is  with  yourselves. 

Again  let  me  appeal  to  the  men  who  come  here  and  see  an 
enthusiastic,  optimistic  throng,  and  who  fail  to  get  rid  of  their 
pessimism  while  they  are  here.  If  you  will  go  home  and  get  all 
of  the  business  offered  in  your  community  —  and  if  you  can't 
get  it  at  one  price  I  am  sure  the  people  in  charge  of  operation 
in  H.  M.  Byllesby  &  Company  will  authorize  you  to  get  it  at  a 
lower  price  —  but  get  all  the  business.  If  you  get  all  the 
business,  you  are  bound  to  develop  a  successful  concern  and 
get  a  handsome  return  on  the  money  invested  in  that  business. 


"SATISFY  YOUR  CUSTOMERS"1 

PERHAPS  it  may  be  of  interest  to  you  if  I  draw  some- 
what on  my  experience  of  the  last  thirty  years  in  the 
central-station  business  in  addressing  you  this  evening. 
The  first  central-station  plant  started  hi  the  United  States 
was  in  the  Central  West,  at  Appleton,  Wisconsin.  I  am  under 
the  impression  that  it  was  run  from  the  water-power  at  Appleton, 
but  of  that  I  am  not  quite  sure,  as  far  as  the  first  plant  installed 
was  concerned.  That  plant  was  started  on  April  20,  1882.  I 
speak  of  it  as  the  first  central-station  plant,  because  it  was  the 
first  multiple-arc  system  started  in  this  or  any  other  country 
for  the  purpose  of  selling  electrical  energy  to  consumers  in  the 
same  way  that  gas  is  sold  to  consumers  over  meter.  The 
first  large  station  started  was  in  New  York  city  a  few  days 
later  — about  fourteen  days  later  than  the  one  started  at 
Appleton,  Wisconsin.  It  had  been  installed  by  the  old  Edison 
Electric  Light  Company,  the  company  that  held  the  Edison 
patents,  for  the  Edison  Electric  Illuminating  Company  of 
New  York.  If  I  am  not  greatly  mistaken,  your  president,  Mr. 
Byllesby,  as  one  of  the  assistants  in  the  engineering  department 
of  the  Edison  Electric  Light  Company,  made  the  drawings 
for  that  first  large  central  station  started  anywhere  on  either 
side  of  the  Atlantic. 

We  people  in  the  electrical  engineering  business  have  com- 
mitted all  kinds  of  errors,  especially  in  connection  with  the 
mechanical  engineering  part  of  our  business;  but  it  is  rather  a 
remarkable  thing  that  the  first  station  of  any  magnitude  that 
was  built  employed  direct-connected  units  —  of  course  not  of 
the  type  that  we  are  using  at  this  time,  but  still  with  the 

1.  A  speech,  somewhat  condensed,  delivered  at  the  banquet  of  H.  M. 
Byllesby  &  Company  and  affiliated  companies  in  Chicago  on  January  20, 1911. 

174 


GOOD-WILL  AS  AN  ASSET  175 

dynamo  directly  connected  to  the  shaft  of  the  prime  mover. 
Later,  we  strayed  away  from  that  method,  but  have  come  back 
to  it  as  the  true  method  of  engineering  in  connection  with  our 
business. 

INVALUABLE  ASSISTANCE  OF  FINANCIAL  HOUSES 

The  days  that  followed  the  starting  of  the  plant  at  Appleton, 
Wisconsin,  and  the  plant  on  Pearl  Street,  in  New  York,  were 
pretty  dark  days  for  the  central-station  business.  It  took  a 
number  of  years  to  demonstrate  the  earning  capacity  that  the 
business  possessed,  and  instead  of  the  business  going  ahead  in 
the  large  centers  of  population,  we  were  forced  to  look  afield 
to  the  small  towns  of  Massachusetts  and  Pennsylvania,  where 
capital  could  be  raised  in  small  amounts,  locally,  for  the  purpose 
of  establishing  central-station  plants.  It  was  not  until  some 
years  later  that  we  were  able  to  obtain  the  financial  assistance 
of  the  large  financial  houses  of  New  York,  Boston,  and  Phila- 
delphia; consequently  there  was  some  delay  in  establishing  the 
large  plants  which  we  look  upon  today  as  more  or  less  com- 
monplace. And  if  it  had  not  been  for  the  very  generous  sup- 
port accorded  the  business  by  such  houses  as  Drexel,  Morgan 
&  Company  of  New  York,  I  think  that  the  development  of  the 
business  would  have  been  still  further  delayed.  Those  of  us 
who  have  been  in  this  business  since  its  inception  must  have 
the  warmest  possible  regard  for  the  great  financial  house  of 
which  Mr.  Morgan  is  still  the  head,1  and  which  house  rendered 
such  marked  and  invaluable  assistance  in  the  development  of 
the  central-station  business  in  this  country. 

TRIBUTES  TO  WESTINGHOUSE  AND  SIEMENS 

At  the  time  the  central-station  business  started  we  had  to 
use  lamps  that  consumed  6.5  watts  per  candle,  and  it  was  not 
until  1890  that  we  got  the  3.1-watt  lamp,  and  it  was  not  until 
the  last  year  or  so  that  that  great  advancement  was  surpassed 

1.  Mr.  J.  Pierpont  Morgan  died  on  March  31,  1913. 


176  ADDRESSES  OF  SAMUEL  INSULL 

by  the  invention  of  the  tantalum,  and  following  that  the  tung- 
sten lamp,  which  have  reduced  the  consumption  of  current  so 
enormously  as  to  bring  our  product  within  the  reach,  practically, 
of  the  poorest  homes  of  the  communities  in  which  we  operate. 

The  next  great  step  after  the  invention  of  the  three-wire 
system  was  the  introduction  in  1886  of  the  alternating-current 
system  by  the  Westinghouse  Company.  I  believe  the  first 
plant  was  installed  by  them  at  Greensburg,  Pennsylvania 

MR.  BYLLESBY:  Great  Barrington,  Massachusetts. 

MR.  INSULL:  Mr.  Byllesby  corrects  me,  and  says  that 
the  first  plant  was  installed  at  Great  Barrington,  Massachusetts; 
but  I  think  these  two  plants  must  have  been  installed  some- 
where about  the  same  time.  I  don't  think  it  is  possible  for  us 
to  say  enough  of  the  wonderful  service  rendered  this  great 
industry  by  Mr.  George  Westinghouse  and  his  associates  in  the 
work  they  did  in  connection  with  the  introduction  of  alternat- 
ing-current apparatus  for  use  for  central-station  purposes. 

The  next  great  step  was  the  building  in  1890  to  1891  of 
slow-speed  electric-generator  units,  this  being  the  first  step  in 
the  reduction  of  the  investment  costs  of  the  central  station, 
and  also  resulting  in  reducing  the  operating  costs  of  the  energy 
here  produced.  I  am  inclined  to  think  that  we  have  to  go 
across  the  water  for  the  first  examples  of  this  class  of  work; 
that  is,  the  marine  type  of  direct-connected  steam  generator 
outfits.  We  owe  their  introduction,  if  my  memory  serves  me 
correctly,  to  the  great  house  of  Siemens  &  Halske,  of  Berlin. 
Especial  honor  is  due  to  the  great  head  of  the  house,  the  late 
Werner  von  Siemens,  for  his  contribution  to  the  inventive  and 
engineering  department  of  our  business. 

The  introduction  of  direct-connected  units  of  the  marine 
type,  with  highly  economical  prime  movers  in  the  shape  of 
triple-expansion  engines,  made  possible  and  was  followed  in 
1896  by  the  introduction  of  high-tension  alternating  transmis- 
sion lines,  operating  substations.  Direct-connected  dynamo 
units  of  high  efficiency,  and  high-tension  transmission  lines 
and  substations  forced  an  abandonment  of  small  generating 
stations  and  compelled  us  to  mass  the  production  of  energy  on 


GOOD-WILL  AS  AN  ASSET  177 

a  very  large  scale,  either  for  the  service  in  large  cities  like 
Berlin,  New  York,  Chicago  and  Philadelphia,  as  well  as  the 
massing  of  production  for  supplying  current  to  a  number  of 
smaller  places,  of  which  you  have  so  many  examples  in  the 
plants  which  you  yourselves  operate.  The  centralization  of 
production  and  increased  business  demanded  prime  movers  of 
greater  size,  lower  investment  cost  and  lower  operating  cost, 
which  resulted  in  the  development  of  very  large  steam  turbo- 
generators, operating  today  in  units  of  upwards  of  20,000  horse- 
power; and  within  the  next  few  months  we  hope  to  have  operat- 
ing in  this  city  units  of  upwards  of  30,000  horse-power  each. 

CENTRAL-STATION  RESULTS  IN  CHICAGO 

The  central-station  business  was  developed  at  quite  a 
late  day  here  in  Chicago.  The  company  that  was  started  at 
Appleton,  Wisconsin,  in  1882,  was  started  by  a  merchandizing 
company  which  was  the  predecessor  of  the  company  here  in 
Chicago  of  which  I  have  the  privilege  to  be  at  the  head.  It  was 
known  as  the  Western  Edison  Light  Company.  But  that  com- 
pany confined  its  efforts  for  a  number  of  years,  from  1881  to 
1888,  to  isolated-plant  business,  and  it  was  not  until  1888  that 
the  first  central  station  was  started  in  this  city  at  139  Adams 
Street.1  In  1892,  which  is  the  first  year  that  I  have  any  detailed 
records  of,  we  had  a  maximum  load  of  about  4,000  kilowatts. 
This  present  winter  we  have  had  a  maximum  load  of  over  183,- 
000  kilowatts.  So  that  you  will  see,  over  the  period  from  1892 
to  1910,  that  our  business  has  doubled  on  an  average  of  a  little 
better  than  once  every  three  years. 

Our  coal  consumption  this  year  will  be  upwards  of  1,000,000 
tons;  and  if  we  used  the  same  number  of  pounds  of  coal  per  kilo- 
watt per  hour  as  was  used  ten  years  ago,  the  coal  consumption 
would  be  nearly  three  times  that  amount.  Or,  in  other  words, 
we  have  been  able  to  improve  the  efficiency  of  our  system  prac- 
tically 300  per  cent  in  the  period  of  ten  years.  I  do  not  mean  to 
say  that  that  improvement  has  been  entirely  with  the  prime 

1.  See  note  on  page  319. 


178  ADDRESSES  OF  SAMUEL  INSULL 

mover.  I  am  talking  of  the  energy  delivered  to  our  customers. 
The  fact  that  we  have  been  able  to  bring  about  such  a  great 
improvement  in  ten  years  shows  how  materially  the  efficiency 
of  our  distributing  system,  as  well  as  that  of  our  prime  movers, 
must  have  improved  during  that  period. 

Our  experience  here  in  Chicago  is  not  peculiar  to  us.  If 
the  statistical  figures  of  most  of  the  companies  which  you 
represent  had  been  carefully  kept  over  the  last  ten  years,  you 
would  find  practically  the  same  relative  improvement  in  the 
plants  hi  the  smaller  cities  throughout  the  country.  The 
progress  which  has  been  made,  you  may  say,  is  marvelous. 
The  real  progress  in  our  business  has  been  all  since  about  the 
year  1900.  And  I  would  venture  to  say,  in  looking  at  the  mat- 
ter from  the  point  of  view  of  the  public,  that  nine-tenths  of  the 
improvements  that  have  been  obtained  in  that  period  have 
been  given  to  the  public  and  scarcely  more  than  one-tenth  has 
been  given  to  those  whose  money  is  invested  in  the  business. 

THE  QUESTION  OF  REGULATION 

There  are  some  pitfalls  into  which  we  may  fall.  We  are 
engaged  in  a  business  which  can  be  run  on  the  most  successful 
basis  (that  is,  a  basis  which  will  give  the  lowest  possible  cost  to 
the  consumer,  commensurate  with  a  fair  return  on  the  capital 
invested)  only  as  a  monopoly  business.  I  would  venture  to 
say  that  we  cannot  expect  to  enjoy  the  privileges  of  running  a 
monopoly  business,  even  if  that  monopoly  be  to  the  true  in- 
terests of  the  community  in  which  we  operate,  unless  we  are 
willing  to  carry  the  burden  which  must  necessarily  go  with  a 
monopoly;  viz.,  the  right  on  the  part  of  the  community,  whether 
it  be  represented  by  local  authorities  or  by  the  state  authorities, 
to  regulate  the  business  in  which  we  are  engaged. 

It  is  no  new  subject  for  me  to  deal  with  in  insisting  that  a 
private  monopoly  must  be  accompanied  by  public  control. 
I  have  preached  that  doctrine  for  a  number  of  years,  having 
laid  it  down  as  one  of  what  I  would  suggest  should  be  the  car- 
dinal principles  of  our  business  in  an  address  I  delivered  before 


GOOD-WILL  AS  AN  ASSET  179 

the  National  Electric  Light  Association1  in  this  city  in  1898.  I 
think  the  sooner  we  recognize  that  we  are  going  to  be  regulated, 
and  insist  upon  the  protection  that  should  go  with  regulation, 
the  sooner  we  will  get  this  question  of  dealing  with  the  local 
public  utilities  settled.  As  Mr.  Byllesby  has  put  it,  if  we  ex- 
pose the  innermost  secrets  of  our  business,  we  should  be  pro- 
tected in  the  enjoyment  of  a  monopoly.  In  most  of  our  states 
today  it  is  a  political  question.  It  should  not  be  a  political 
question.  And  if  we  use  our  endeavors  to  bring  about  a  settle- 
ment of  this  question,  it  will  cease  to  be  a  political  question, 
and  will  get  where  it  belongs,  namely,  into  the  class  of  economic 
questions  which  will  not  permit  of  any  politics  being  in  it  at  all. 
The  question  of  influencing  public  opinion  on  this  subject 
rests  with  you  gentlemen  sitting  around  the  tables  here.  Those 
of  us  who  direct  the  policy  of  large  enterprises  can  do  but  little 
unless  we  have  the  assistance  of  the  men  who  are  operating  the 
plants  and  coming  in  contact  with  the  public  from  day  to  day. 
And  I  know  of  no  qualification  so  necessary  in  our  business  — 
I  will  put  it  before  engineering  ability,  or  technical  skill, 
selling  ability,  or  any  other  line  of  business  ability  —  as  the 
ability  to  deal  in  a  satisfactory  manner  with  the  people  with 
whom  you  come  in  contact  from  day  to  day. 

GREAT  QUESTIONS  OF  THE  FUTURE 

If  you  were  engaged  in  the  mercantile  business,  one  of  the 
first  things  you  would  want  to  do  would  be  to  satisfy  your 
customers.  And  that  necessity  is  far  more  and  far  greater  in 
our  business  than  it  is  in  the  mercantile  business.  We  have  to 
deal  with  the  whole  community.  The  feeling  of  that  whole 
community  toward  your  business,  if  it  be  good,  is  a  valuable 
asset  to  your  company.  The  feeling  towards  your  business, 
if  it  be  unfriendly,  means  disaster  to  the  investment  you  have 
in  your  care. 

I  think  that  our  future  rests  very  largely  with  ourselves. 

1.  See  "Standardization,  Cost  System  of  Rates,  and  Public  Control," 
page  34  et  seq. 


180  ADDRESSES  OF  SAMUEL  INSULL 

If  we  cannot  operate  our  business  in  a  way  to  earn  the  respect 
of  the  community  in  which  we  work,  there  can  be  but  one  out- 
come to  our  business,  namely,  failure. 

I  might  go  on  talking  to  you  for  a  long  time,  not  only  on 
the  question  of  pitfalls,  but  on  the  question  of  the  possibil- 
ities of  our  business.  If  you  were  to  recall  the  facts  you  would 
find  that  not  more  than  twenty-five  years  ago  there  was  less 
than  $10,000,000  invested  in  the  central-station  business,  and 
that  today  there  is  upwards  of  $1,250,000,000  invested.  The 
possibilities  of  the  next  quarter  of  a  century  are  far  greater 
than  those  of  the  last  quarter  of  a  century.  We  have  nearly 
perfect  apparatus.  We  have  relatively  cheap  money  that  can 
be  obtained  for  investment  in  our  business.  We  have  low 
operating  costs,  and  we  have  before  us  the  possibility  of  produc- 
ing all  of  the  energy  required  in  the  communities  in  which  we 
operate. 

A  very  remarkable  address  on  the  possibilities  of  the  central- 
station  business  was  delivered  at  the  last  inaugural  meeting  of 
the  Institution  of  Electrical  Engineers  in  London  by  Mr.  de 
Farranti,  the  new  president  of  the  association,  and  who  was  one 
of  the  pioneers  in  our  business  hi  the  development  of  large 
centers  of  production  and  large  areas  of  distribution.  Mr.  de 
Farranti  addressed  himself  to  the  question  of  conservation  of 
the  fuel  resources  of  Great  Britain.  The  very  life-blood  of 
Great  Britain  is  its  coal  supply.  The  only  way  that  country  can 
keep  the  mastery  of  the  seas  is  by  the  preservation  of  its  highly 
economical  coal  beds.  Mr.  de  Farranti  sketched  out  the  plan 
of  dividing  England,  Scotland  and  Wales  into  one  hundred 
districts,  and  producing  all  of  the  energy  required  for  all  kinds 
of  purposes — lighting,  power,  heating,  and  transportation — all 
from  these  hundred  centers  of  production.  I  have  not  in  mind 
the  saving  which  he  said  would  be  effected  by  the  lessening  in 
the  consumption  of  coal,  but  it  was  somewhat  on  the  lines  of  the 
reduction  that  you  and  ourselves  have  been  able  to  bring  about 
in  the  consumption  of  coal  in  our  various  plants  in  the  last 
ten  years. 

So  that  to  my  mind,  instead  of  our  field  narrowing,  it  is 


GOOD-WILL  AS  AN  ASSET  181 

going  to  broaden  from  year  to  year.  When  the  great  railroad 
systems  of  the  country  come  to  the  conclusion  that  it  is  time  to 
electrify,  they  should  be  able  to  obtain  that  energy,  from  the 
shores  of  Maine  to  those  of  California,  from  the  central-station 
plants  existing  at  the  time  they  want  to  make  that  change. 
And  I  might  say  that  that  great  step  in  connection  with  our 
business,  viz.,  the  electrification  of  the  steam  terminals  of  the 
country,  and  possibly  later  of  their  main  lines,  would  be  in  a 
far  better  position  today  if  the  two  great  transportation  com- 
panies centering  in  New  York  which  have  electrified  their 
terminals  had  bought  their  electricity  at  rates  at  which  you  and 
myself  and  others  are  very  willing  to  sell  energy  to  the  trans- 
portation companies  in  our  particular  communities. 


RELATIONS  OF  THE  PUBLIC  TO  THE 
PUBLIC-SERVICE  CORPORATIONS1 

TO  MEET  the  members  of  the  Chicago  Engineers'  Club 
is  a  great  pleasure.  I  take  a  lively  personal  interest  in 
your  profession.  Most  of  whatever  success  I  have  made, 
and  I  might  add  not  a  few  of  the  failures  I  have  made,  have  come 
to  me  from  my  connection  with  the  fraternity  to  which  you 
gentlemen  belong.  A  great  many  of  my  pleasures,  and  not  a 
few  of  my  worries,  have  been  caused  by  the  engineering  pro- 
fession, and  therefore  it  is  a  pleasure  to  me  to  come  in  close 
contact  with  you  and  to  talk  to  you  on  a  subject,  which,  al- 
though somewhat  technical,  I  can  presume  to  talk  upon  in 
the  presence  of  engineers.  It  is  an  especial  pleasure  to  me,  be- 
cause it  often  happens  that  when  I  am  talking  to  engineers  I 
can  see  in  their  faces  the  suggestion  that  it  is  somewhat  pre- 
sumptuous for  a  layman  to  talk  to  them  on  engineering  ques- 
tions or  on  technical  questions. 

Now,  as  to  the  relation  of  the  public-service  corporation 
with  the  public.  When  Mr.  Heyworth2  asked  me  to  address 
you,  I  hardly  knew  what  branch  of  the  business  with  which  I 
am  connected  I  would  like  to  talk  about,  and  therefore  I  made 
the  subject  as  broad  as  possible;  and  you  must  excuse  me  if  I 
seem  to  confine  myself  to  some  of  the  details  of  the  question, 
and  not  deal  with  it  as  a  whole. 

The  first  essential  of  a  public-service  corporation  in  bid- 
ding for  success  is  to  give  the  very  best  of  service  at  the  lowest 
possible  price.  It  matters  not  whether  that  public-service 
corporation  be  a  local  one,  located  in  a  city  like  Chicago,  or 

1.  An  after-luncheon  speech  before  the  Chicago  Engineers'  Club  on  Jan- 
uary 24,  1911. 

2.  Mr.  James  O.  Heyworth,  then  president  of  the  club. 

182 


DUTIES  OF  CITIZENS  183 

whether  its  business  embraces  a  state  or  a  series  of  states.  If 
a  public-service  corporation  expects  to  bid  for  public  favor  — 
and  if  it  does  not  get  public  favor  it  might  just  as  well  go  out  of 
business  —  it  must  give  the  very  best  possible  service,  with 
the  very  best  possible  apparatus,  at  the  lowest  possible  price, 
considering  the  price  that  is  to  be  paid  for  money  in  the  markets 
of  the  world  and  considering  also  what  you  have  to  pay  for 
labor  and  the  amount  of  depreciation  on  the  plant  that  you  are 
dealing  with. 

THE  BEST  SERVICE  AT  THE  LOWEST  PRICE 

We  have  had  in  this  community  cases  where  public-service 
corporations  have  lost  the  good  opinion  of  the  public,  largely 
on  account  of  their  failure  to  give  first-class  service,  that  failure 
sometimes  being  due  to  conditions  over  which  those  public- 
service  corporations  had  little  or  no  control. 

Take  the  business  which  it  is  my  privilege  to  manage  in 
this  community.  We  endeavor  to  give  the  very  best  possible 
service  we  can  at  the  lowest  possible  price.  The  public  has 
a  great  deal  to  do  with  bringing  about  this  desirable  result.  If 
the  business  of  the  production  and  sale  of  electrical  energy  is 
to  be  carried  to  the  greatest  possible  success,  that  is,  its  produc- 
tion at  the  lowest  possible  cost,  with  the  product  sold  at  the 
lowest  possible  price  having  in  mind  a  reasonable  profit  to  the 
investor,  that  business  must  be  a  monopoly  business.  It  is  a 
waste  either  of  the  money  of  the  investor,  or  the  money  of  the 
customer,  or  in  some  cases  the  money  of  the  taxpayer,  if  any 
attempt  is  made  to  operate  the  business  other  than  as  a  monop- 
oly business. 

That  is  what  I  mean  when  I  say  that  the  public  has  some- 
thing to  do  with  getting  the  best  results  in  the  running  of  such 
a  business  as  that  in  which  I  am  engaged.  It  matters  not  how 
economical  may  be  our  apparatus,  how  advanced  our  engineer- 
ing, how  good  the  management  of  our  business,  if  the  public 
decrees  through  its  proper  representatives  that  somebody  else 
by  the  side  of  us  shall  deal  in  precisely  that  same  line  of  busi- 


184  ADDRESSES  OF  SAMUEL  INSULL 

ness,  shall  have  a  duplication  of  our  plant  and  a  duplication 
of  our  service,  the  results  from  an  economic  point  of  view  must 
be  bad.  The  people  who  have  to  pay  for  it  are  those  who  buy 
our  product. 

This  question  of  economy  of  production  does  not  mean 
merely  the  production  of  energy  for  lighting  purposes,  but 
energy  for  every  purpose  that  it  can  be  used  for  in  the  com- 
munity. It  matters  not  whether  it  is  for  transportation 
purposes,  for  manufacturing  purposes,  or  for  the  hundred  and 
one  processes  in  the  industrial  life  of  the  community,  if  you  are 
to  get  the  very  best  possible  results,  the  entire  production  of  a 
given  area  —  not  necessarily  of  just  one  city,  but  of  a  given 
area  of  country  —  should  come  under  one  head. 

BOLDLY  PREACHING  THE  DOCTRINE  OF  MONOPOLY 

In  other  words,  I  am  here  boldly  preaching  monopoly  as  an 
economic  proposition  in  a  day  when  our  public  men  look  more 
or  less  askance  at  the  idea  of  monopoly.  And  I  preach  monop- 
oly because  it  is  the  only  possible  way  to  get  the  results.  It  is 
on  account  of  our  enjoying  a  practical  monopoly  in  this  com- 
munity that  we  are  able  to  sell  more  electricity  than  is  sold  in 
any  other  community  in  the  world;  that  we  have  more  cus- 
tomers who  buy  our  product  than  is  the  case  in  any  other  city 
in  the  world,  and  that  the  average  price  at  which  we  do  the 
business  is  lower  than  in  any  large  city  either  on  this  side  or 
the  other  side  of  the  Atlantic. 

The  statements  that  I  have  made  may  seem  somewhat 
egotistical;  but  I  think  you  will  find  that  they  are  not  far- 
fetched, if  you  will  look  into  the  figures  with  relation  to  the 
output  of  electrical  energy  and  prices  at  which  it  is  sold  in  the 
various  large  cities  either  in  this  country  or  abroad. 

In  order  to  do  these  things  we  have  to  have  a  good  deal  of 
energy,  and  before  passing  into  the  larger  subject  of  public- 
service  corporations  as  a  whole  in  this  community  I  will  give 
you  a  few  of  the  figures  with  relation  to  our  own  business. 

We  have  upwards  of  125,000  customers.     I  think  that  is  the 


DUTIES  OF  CITIZENS  185 

largest  number  of  customers  of  any  company  in  the  electricity 
manufacturing  business.  Our  maximum  load  this  present 
winter  has  been  up  to  date  275,000  horse-power.  Our  output 
for  this  year  will  be  about  25  per  cent  greater,  with  a  population 
of  only  two  millions  and  a  quarter,  than  the  output  of  electrical 
energy  in  the  county  of  London,  with  a  population  of  more 
than  seven  millions  of  people.  Our  cash  investment  is 
about  $70,000,000.  Our  business  doubles  every  two  and  a 
half  years.  I  do  not  mean  to  say  in  money  figures,  but  I 
mean  to  say  in  the  energy  that  we  put  out;  about  every  two  and 
a  half  years  our  business  doubles,  whether  measured  by  the 
amount  of  our  maximum  load  or  the  amount  of  our  steady, 
daily  output.  Our  coal  consumption  is  upwards  of  a  million 
tons  a  year,  increasing  now  at  a  rate  in  about  direct  proportion 
to  the  increase  in  our  output.  Our  pounds  of  coal  per  unit 
sold  are  about  a  third  of  what  they  were  seven  or  eight  years 
ago.  That  improvement  in  efficiency  does  not  come  entirely 
from  the  prime  movers;  it  comes  partly  from  our  distribution 
efficiency;  that  is,  the  higher  efficiency  of  our  distribution 
systems. 


DUTIES  OF  CITIZENS  TO  PUBLIC-SERVICE  INDUSTRIES 

Speaking  of  a  million  tons  of  coal,  when  you  bear  in  mind 
that  that  is  upwards  of  ten  per  cent  of  the  entire  soft-coal  con- 
sumption in  this  city,  it  will  give  you  some  idea  of  the  problem 
it  is  to  handle  merely  the  fuel  consumed  from  day  to  day.  It 
it  no  uncommon  thing  for  upwards  of  two  hundred  tons  an 
hour  to  pass  over  our  grate  bars  during  certain  hours  of  the 
day  in  the  winter,  and  we  have  to  do  that  to  produce  the  energy 
and  yet  come  within  reasonable  reach  of  complying  with  the 
demands  of  another  engineering  body,  the  Smoke  Abatement 
Commission. 

I  mention  these  figures  with  relation  to  the  business  which 
it  is  my  privilege  to  run  to  give  you  some  idea  of  the  magnitude 
of  the  public-service  business  in  a  community  like  Chicago. 
The  serious  point,  to  my  mind,  from  the  point  of  view  of  a 


186  ADDRESSES  OF  SAMUEL  INSULL 

citizen  of  this  community,  is  not  so  much  the  relations  of  the 
public-service  corporations  to  the  public,  but  the  relations  of 
the  public  to  the  public-service  corporations.  That,  I  think, 
is  really  the  most  serious  situation  that  exists  in  this  community 
with  relation  possibly  to  any  local  business. 

The  cash  in  vested  in  the  local  public-service  business — that 
is,  telephone,  gas,  surface  and  elevated  urban  transportation, 
electric  light  and  power,  and  exclusive  of  the  urban  and  subur- 
ban transportation  of  the  steam  railroads  —  amounts  to  be- 
tween $450,000,000  and  $500,000,000.  Just  pause  a  moment 
and  think  of  the  stupendous  figures.  I  am  not  talking  secu- 
rities; I  am  talking  money.  The  estimate  given  is,  I  think, 
a  fair  approximation  of  the  amount  invested  in  all  of  the  local 
public-service  businesses  in  this  community,  with  the  exception 
of  the  large  urban  and  suburban  and  interurban  steam-trans- 
portation businesses  connected  with  Chicago,  which  of  them- 
selves, apart  from  the  trunk-line  business  of  the  steam  railroads, 
must  represent  an  enormous  additional  investment. 

The  gross  earnings  of  these  properties  is  somewhere  be- 
tween $75,000,000  and  $80,000,000  a  year. 

The  expenditures  for  extensions  and  improvements  during 
the  last  three  or  four  years  have  been  somewhere  between  $35,- 
000,000  and  $40,000,000  a  year,  caused  somewhat  by  the  ex- 
traordinary expenditures  of  the  two  main  companies  operating 
the  surface  lines  on  account  of  their  rehabilitation.  But  I 
think  when  you  figure  the  growth  of  the  city  and  the  fact  that  in 
hardly  any  department  of  public  service  has  the  point  of  satura- 
tion been  reached,  the  least  possible  figure  that  can  be  put  down 
as  that  necessary  for  future  development  is  about  $25,000,000 
a  year. 

The  total  number  of  employees  in  the  local  public-service 
businesses  of  this  city,  leaving  out  entirely  the  steam-railroad 
employees,  is  nearly  50,000.  If  you  figure  five  to  a  family,  you 
will  find  that  nearly  ten  per  cent  of  the  population  of  this  large 
city  is  dependent  for  its  daily  bread  upon  the  prosperity  of 
the  public-service  corporations  of  this  community.  I  there- 
fore say  that  with  these  figures  before  us,  considering  also  the 


DUTIES  OF  CITIZENS  187 

enormous  capital  investment  employed,  the  millions  expended 
from  year  to  year  in  improvements  and  extensions,  the  tre- 
mendous disbursements  in  wages  (disbursements  to  labor 
exceeding,  probably,  the  profit  which  capital  receives  for 
its  money)*  we  may  realize  that  one  of  the  most  vital  questions, 
one  of  the  most  serious  questions,  to  a  community  like  Chicago, 
is  its  relation  with  the  public-service  corporations.  It  is 
apparent  that  unless  the  policy  of  "live  and  let  live"  is  de- 
veloped and  maintained  with  reference  to  the  public-service 
business  it  does  not  seem  an  unreasonable  statement  to  make 
that  failure  of  the  public-service  corporations  in  this  community 
must  have  a  very  serious  effect  upon  general  business  condi- 
tions in  this  city,  and  upon  the  interests  of  a  large  portion  of 
those  who  live  here  in  Chicago. 

If  you  add  to  the  number  of  employees  of  the  local  public- 
service  corporations  those  of  the  steam  railroads  centering  here 
in  Chicago,  I  think  it  would  be  no  unreasonable  statement  to 
say  that  upwards  of  twenty  per  cent  of  the  population  of  this 
great  community  is  dependent  upon  local  and  state  and  inter- 
state public-service  business  for  a  livelihood. 

CLAMOR  AND  GUESSWORK  Do  NOT  PROMOTE  INDUSTRY 

In  closing  I  do  not  think  that  I  can  do  better  than  read  a 
quotation  from  one  of  the  leading  articles  in  the  Chicago  Record- 
Herald  of  December  30  last,  as  a  means  of  impressing  upon  you 
my  point  of  view  with  relation  to  the  importance  of  these  great 
industries  to  this  community.  The  question  under  discussion 
was  regulation  —  of  telephones,  I  think  —  and  the  writer 
finished  his  article  by  saying: 

"To  make  gas,  telephone,  water  transportation  or  other 
rates  footballs  of  party  or  factional  politics  is  to  make  honest 
government  and  honest  service  of  the  public  very  difficult,  if 
not  utterly  impossible.  Clamor  and  guesswork  may  suit 
office  seekers,  but  they  do  not  promote  industry,  good  govern- 
ment, or  civic  peace  and  justice." 

In  urging  on  you  gentlemen  the   extreme   importance  of 


188  ADDRESSES  OF  SAMUEL  INSULL 

the  public-service  industries  to  a  community  like  Chicago  I 
do  not  want  you  to  go  away  with  the  impression  that  I  do 
not  think  monopoly  industries  should  be  regulated,  or  that  they 
should  be  allowed  to  go  along  in  their  own  sweet  way,  enjoy- 
ing the  privileges  of  their  position,  and  not  accepting  any  of 
the  obligations.  I  am  a  strong  believer  in  proper  government 
regulation  of  all  such  enterprises.  I  care  not  whether  they  be 
local,  state,  or  national. 

But  I  do  not  believe  that  those  enterprises  should  be  reg- 
ulated by  government  as  a  matter  of  political  expediency.  I 
think  they  should  be  regulated  and  governed  on  a  basis  of 
what  is  economically  right,  what  is  economically  fair,  what  is 
just  to  the  user,  the  consumer,  and  what  is  just  to  the  man 
who  puts  up  the  money,  the  capitalist.  On  that  basis,  I  am  a 
very  strong  believer  in  regulation  and  control.  In  fact,  I  have 
been  advocating  it  in  my  own  line  of  business  now  for  between 
fifteen  and  twenty  years.  When  we  get  to  a  point  that  these 
various  public  businesses,  as  I  say,  local,  or  state,  or  national, 
are  regulated  on  purely  economic  lines,  you  will  find  that  the 
consumer  will  get  more  satisfactory  service,  that  he  will  get 
it  at  a  lower  price  because  money  will  be  cheaper,  and  that  the 
situation  will  be  better  all  the  way  around.  It  is  the  only 
way  that  you  can  really  remove  these  things  from  politics. 


VALUE  OF  COMPANY-SECTION  ORGANIZA- 
TION IN  THE  NATIONAL  ELECTRIC 
LIGHT  ASSOCIATION1 

IT  IS  rather  to  be  regretted,  I  think,  that  there  are  not  more 
representatives  here  this  afternoon  from  companies  that 
have  no  company  sections.  I  consider  that  when  Mr. 
H.  L.  Doherty  made  the  suggestion  that  we  should  establish 
these  company  sections  he  rendered  a  great  service  to  the 
industry;  that  is,  not  only  to  the  association  but  also  to  the 
companies  themselves.  Naturally,  I  look  at  this  matter  from 
the  point  of  view,  to  use  the  expression  of  this  morning,  rather 
of  the  "master"  than  of  the  "man,"  although  I  try  whenever  I 
am  looking  at  things  from  that  point  of  view  also  to  view  it  from 
the  "man's"  point  of  view.2  I  consider  that  from  the  com- 
pany's point  of  view  it  is  one  of  the  most  desirable  things  that 
has  been  brought  into  our  business.  I  know  of  nothing  that 
contributes  so  to  esprit  de  corps  in  an  organization,  that  results 
in  so  close  a  feeling  of  relationship  and  loyalty  to  the  organiza- 
tion, as  the  establishment  of  these  company  sections.  It  is 
much  to  be  regretted  that  the  greater  part  of  the  company- 
section  membership  is  confined  to  five  or  six  of  the  larger  com- 
panies. It  is  a  class  of  work  that  can  be  extended  right  down 
to  the  smallest  organization,  the  smallest  electric-lighting  com- 
pany that  has  membership  in  the  national  organization;  and 
I  think  that  if  we  want  this  organization  of  ours  to  maintain  its 
virility  we  have  got  to  look  to  the  company  sections  to  accom- 
plish that. 

1.  Remarks  made  at  the  company-section  session  of  the  National  Elec- 
tric Light  Association  at  the  convention  in  New  York  on  May  30,  1911. 

2.  Referring  to  a  paper  entitled  "  Master  and  Men,"  by  Mr.  Paul  Luepke, 
of  Trenton,  N.  J.,  read  at  the  morning  session. 

189 


190  ADDRESSES  OF  SAMUEL  INSULL 

I  think  we  should  work  at  some  scheme  that  will  get  rep- 
resentation of  company  sections  at  the  national  convention.1 
We  tried  to  do  it,  indirectly,  in  Chicago  (just  as  Philadelphia 
has  tried  to  do  it  by  one  scheme  and  another)  by  bringing  some 
of  our  company-section  members  here. 

However  desirable  it  may  be  to  have  close  relationship 
between  the  company  sections  and  the  employees,  say,  of  the 
electrical  contractors  or  allied  industries,  I  am  inclined  to  think 
that  it  would  be  a  misfortune  to  the  company  sections  connected 
with  the  National  Electric  Light  Association  to  admit  the  em- 
ployees of  those  concerns,  as  the  result  might  be  a  repetition  of 
the  unfortunate  relationship  that  originally  existed  between  the 
supply  people  and  the  manufacturers  in  the  national  organiza- 
tion. What  we  want  to  do,  and  what  we  want  to  do  just  as 
much  for  the  benefit  of  the  employee  as  for  the  employer,  is  to 
bind  our  people  close  to  us  by  whatever  method  we  think  will 
bring  about  that  result.  I  know  of  no  method  that  will  bring 
about  that  result  so  well  as  by  educating  the  foreman  of  the 
linemen  and  fitting  him  to  occupy  an  executive  position. 
It  has  been  done  in  the  steam-railroad  business  very  extensively, 
so  that  today  I  think  you  will  find  that  the  greater  part  of  the 
trunk  lines  of  the  country  have  as  their  executive  heads  men 
who  have  worked  in  section  gangs  when  they  first  started  in  the 
railroad  business.  There  is  no  reason  why  we  should  not  bring 
about  that  same  result  in  our  business.  I  know  of  no  better 
way  of  doing  it  than  by  the  encouragement  of  company  sections 
among  all  of  our  company  members,  and  I  think  that  the  main 
effort  of  the  next  administration  should  be  in  the  same  direction 
as  the  fine  efforts  made  by  Mr.  Freeman  and  his  fellow  officers 
during  the  last  year  in  encouraging  the  company -section  mem- 
bership. If  the  work  is  followed  out,  we  will  have  a  very  large 
number  of  these  sections,  and  they  will  be  of  great  benefit 
alike  to  the  companies  and  to  their  employees. 

While  I  appreciate  that  you  cannot  get  men  together  in  a 

1.  Mr.  Insull's  idea  was  carried  out  later,  at  least  partially.  At  the  Phila- 
delphia convention  of  the  National  Electric  Light  Association,  on  June  3,  1914, 
a  meeting  of  company-section  delegates  was  held.  The  association  has  now 
(March,  1915)  a  standing  committee  on  company  sections. 


SECTIONAL  ORGANIZATION  191 

room,  say  once  a  month,  who  have  been  hard  at  work  all  day 
unless  you  provide  them  with  some  form  of  entertainment,  I 
think  there  should  be  some  continuity  of  policy  as  between  the 
executive  officers  of  this  organization  and  the  various  company 
sections  throughout  the  country.  I  think  there  ought  to  be  a 
proper  exchange  of  all  classes  of  information.  I  do  not  know 
exactly  how  it  could  be  worked  out  most  economically,  because, 
after  all,  all  these  things  cost  money.  While  we  have  a  large 
and  influential  organization  and  can  raise  considerable  amounts 
of  money  for  special  purposes,  the  regular  income  of  the  as- 
sociation is  ridiculously  low,  if  you  look  at  it  from  the  point 
of  view  of  the  importance  of  the  organization.  But  there  ought 
to  be  some  method  of  exchanging  the  ideas,  exchanging  the 
papers,  and  insuring  continuity  of  policy. 

A  subject  that  we  are  all  of  us  vitally  interested  in,  that 
affects  our  very  existence,  is  our  relations  with  the  public. 
We  are  subject  to  all  kinds  of  attacks.  It  has  been  stated  that 
we  have,  say,  about  65,000  employees  of  the  member  companies 
of  this  association.  I  think  that  that  is  a  low  estimate.  I 
think  that  a  fair  estimate  is  nearer  100,000  employees.  The 
experience  of  Brooklyn,  New  York,  Chicago  and  Philadelphia 
shows  that  we  can  count  on  about  40  per  cent  of  our  employees 
becoming  members  of  the  company  sections.  Suppose  we  have 
100,000  employees  in  various  parts  of  the  country  —  nay,  as  we 
are  reminded  by  the  flags1  that  it  is  my  pleasure  to  see,  they 
are  on  both  sides  of  the  line.  What  would  be  the  effect  on 
public  opinion  if,  say,  40  per  cent  of  that  number  had  a  proper 
understanding  of  the  questions  governing  cost  and  selling  price, 
of  the  relations  of  capital  and  labor,  of  the  relations  of  the  com- 
munity to  our  business,  of  the  serious  effect  upon  the  cost  of 
our  product  to  our  consumers  if  we  suffer  from  adverse  legisla- 
tion and  cannot  obtain  money  at  a  fair  price?  Questions 
of  that  kind  could  be  discussed  in  our  company  sections.  It 
can  be  done  by  the  men  inside  the  organization  perhaps.  Or 

1.  The  room  was  decorated  with  the  national  colors  of  both  the  United 
States  and  Great  Britain.  The  "  line  "  of  the  text  is,  of  course,  the  international 
boundary  between  the  United  States  and  Canada. 


192  ADDRESSES  OF  SAMUEL  INSULL 

there  are  many  men  throughout  the  country  who  are  very  glad 
to  give  their  time  to  enlighten  us  and  our  employees  on  those 
subjects.  Again  I  repeat  that  it  is  of  vital  importance  alike  to 
the  National  Electric  Light  Association  and  its  company  mem- 
bers and  their  employees  to  push  this  movement  to  the  greatest 
possible  success. 


THE  FINAL  TEST  OF  WELFARE  WORK1 

WHILE  a  number  of  the  members  of  our  association  have 
done  a  great  deal  in  connection  with  welfare  work,  it  is 
perfectly  natural  that  in  a  business  which  has  grown  in 
a  little  less  than  three  decades  to  the  enormous  proportions 
which  the  electric-light-and-power  industry  of  today  shows  our 
attention  should  have  been  devoted  more  especially  to  matters  of 
new  invention,  improvements  in  efficiency  of  apparatus,  and  im- 
provements in  the  method  of  conducting  our  business.  In  pass- 
ing it  might  be  well  to  mention  that,  notwithstanding  all  of  the 
work  we  have  bestowed  on  these  various  subjects,  the  savings 
accomplished — that  is,  in  dollars  and  cents  —  have  in  the  main 
gone  to  our  customers,  the  consumers  of  electricity  throughout 
the  country,  to  an  extent  probably  of  from  90  to  95  per  cent. 

The  question  of  our  relations  to  the  public,  to  the  com- 
munities in  which  we  do  business  —  the  view  taken  of  us  by 
those  we  serve,  our  customers  —  is  a  subject  to  which  we  have 
given  a  great  deal  of  attention  in  the  past,  and  will  be  forced 
to  give  a  great  deal  of  attention  in  the  future.  But  I  know  of  no 
subject  that  will  bring  us  greater  return  — in  speaking  of  greater 
return  I  am  not  speaking  of  the  money  return  —  I  say  I  know 
of  no  subject  that  will  bring  us  greater  return  than  to  devote 
our  attention  to  the  welfare  of  those  who  work  under  us. 

1.  Mr.  Insull  has  been  deeply  interested  in  welfare  work  for  many  years. 
This  subject,  with  various  aspects  of  public  relations,  is  considered  in  the 
National  Electric  Light  Association  by  the  public  policy  committee,  which  is 
the  most  influential  committee  of  the  association.  Mr.  Insull  has  been  a  mem- 
ber of  this  committee  ever  since  its  organization.  He  has  presented  its  reports 
at  the  annual  conventions  of  the  association  for  a  number  of  years.  This  was 
the  case  at  the  brilliant  gathering  at  the  New  Theater,  New  York  city,  on  the 
night  of  May  31,  1911.  The  report  of  that  year  related  principally  to  rela- 
tions between  capital  and  labor.  After  reading  it,  Mr.  Insull  added,  on  his 
own  account,  the  remarks  reported  here.  See  also  "  Broad  Questions  of  Public 
Policy,"  page  405. 

193 


194  ADDRESSES  OF  SAMUEL  INSULL 

None  of  you  in  this  room  can  fail  to  appreciate  the  fact  that 
one  of  the  greatest  pleasures  that  can  possibly  come  to  men  who 
have  the  responsibility  of  directing  large  enterprises  is  not  that 
of  merely  making  money  for  their  stockholders  and  themselves, 
but  the  pleasure  that  comes  to  them  from  the  opportunities 
they  have  to  do  good  to  then-  fellows.  They  want  to  try  to 
leave  the  world  a  little  better  off  when  they  leave  it  than  when 
they  came  into  it. 

While  the  altruistic  side  of  this  work  is  very  inviting,  yet 
there  is  another  side  to  it  which  we  have  to  consider;  namely, 
the  financial  side.  We  are  engaged  in  a  monopoly  business, 
and  it  has  to  be  operated  economically  to  the  best  interests  of 
the  users  of  our  service.  We  must  adopt  such  methods  as  will 
enable  them  to  get  the  service  we  render  for  the  least  possible 
price  so  as  to  stand  the  scrutiny  of  such  regulating  body  as  we 
may  be  subject  to.  The  regulation  of  our  rates  may  come  in 
the  shape  of  action  by  a  board  of  aldermen,  or  it  may  come  in 
the  shape  of  action  by  a  state  commission,  or  it  may  come  in  the 
shape  of  action  by  legislatures  having  the  power  to  deal  with 
matters,  or  it  may  come  in  the  shape  of  an  appeal  to  the  force  of 
public  opinion  on  account  of  the  unreasonableness  of  our  rates. 
.  All  of  us,  hi  one  form  or  another,  are  subject  to  regulation. 
The  real  final  test  of  this  welfare  work  will  come  when  we  pro- 
pose to  include  all  the  various  matters,  or  most  of  the  various 
matters  referred  to  in  this  report,  in  the  cost  of  service,  and 
consequently  the  selling  price,  to  our  customers.  This  price 
has  to  be  passed  on  finally  by  whatever  regulating  body  it  may 
be  our  particular  good  fortune  to  come  in  contact  with. 

I  know  of  no  business  where  continuity  of  service  is  of  such 
great  importance  as  in  the  business  in  which  we  are  engaged.  It 
is  a  business  of  great  capitalization  in  proportion  to  the  yearly 
return.  It  is  impossible  to  run  it  satisfactorily  so  as  to  turn 
over  the  cash  capital  more  than  once  in  five  years.  There  are 
very  few  instances  on  either  side  of  the  Atlantic  where  such  a 
result  has  been  obtained.  The  consequence  is  that  our  in- 
terest account  and  our  depreciation  account  are  of  much 
greater  importance  than  our  wage  account.  What  we  need  in 


WELFARE  WORK  195 

order  to  keep  down  our  interest  account  and  our  depreciation 
account  is  continuous  and  faithful  service.  That  can  be  ob- 
tained only  by  offering  some  incentive  beyond  the  mere  wage 
which  every  laborer  and  every  man  who  works  with  his  hands 
or  with  his  brains  is  entitled  to. 

The  subjects  that  we  deal  with  in  this  report  are  not  our 
subjects  merely.  We  are  not  alone  in  this  work.  Most  of  the 
great  industrial  corporations  in  this  country  are  giving  a  great 
deal  of  thought  and  attention  to  these  matters.  As  a  result 
they  are  giving  substantial  aid  to  the  welfare  work  in  connection 
with  their  employees,  largely  for  the  same  reasons  set  forth  in 
our  report  and  the  reasons  I  have  set  forth  in  my  remarks. 

If  you  will  look  into  the  progress  of  this  matter  in  other 
countries  you  will  find  that  a  great  deal  is  being  done  in  the 
direction  of  governmental  assistance  and  legislative  action. 
Take,  for  instance,  the  drastic  Employees  Liability  Act  passed 
a  year  or  so  ago  in  England,  or  the  Old-Age  Pension  bills  passed 
in  England  and  Germany,  or  Compulsory  Insurance,  with  all 
its  complex  details,  now  proposed  by  the  British  Chancellor  of 
the  Exchequer.  These  are  examples  of  a  species  of  govern- 
mental paternalism,  certainly  with  relation  to  the  old-age 
pensions  and  compulsory  insurance,  which  can  hardly  find  any 
favor  in  this  country.  It  seems  to  us  of  the  public  policy  com- 
mittee that  it  is  far  better  that  such  work,  in  this  country  at 
least,  should  be  done  voluntarily,  based  upon  the  mutual 
interest  of  the  consumer,  the  employee,  and  the  capital  in- 
vested. That  is  the  work  we  are  hoping  to  start  here  tonight 
among  those  of  you  who  have  not  taken  the  subject  up.  We  do 
not  want  you  to  think  that  it  is  necessary  in  every  case  to  carry 
out  all  the  plans  suggested  in  the  report.1  That  is  not  a 
possibility  in  a  great  many  cases. 

It  is  to  be  hoped  that  every  one  of  you  will  apply  to  your 
particular  case  at  least  one  of  these  schemes,2  or  some  other 

1.  The  full  report  is  printed  in  Vol.  I  of  the  Proceedings  of  the  National 
Electric  Light  Association  for  1911. 

2.  Relating  to  such  subjects  as   accident   insurance,  sickness   insurance, 
death  benefits,  service  annuities,  profit  sharing,  employees'  savings  and  invest- 
ment funds,  and  life  insurance. 


196  ADDRESSES  OF  SAMUEL  INSULL 

scheme;  and  if  you  do  it  you  will  improve  your  relations  with 
your  employees.  I  am  confident  it  will  improve  your  relations 
with  the  public  and  will  add  to  the  stability  of  the  securities  of 
the  business  in  which  you  are  engaged. 


THE   NECESSITY  OF  THE  APPRAISAL   OF 
PUBLIC-UTILITY  PROPERTIES1 

MR.  BYLLESBY  has  dealt  with  the  subject  of  the 
appraisal  of  our  properties  in  a  very  able  way  from 
what  I  might  call  the  professional  or  engineering  point 
of  view.  My  connection  with  such  matters  is  more  particularly 
with  the  financial  side  of  the  subject,  with  the  capital  side  of  the 
question.  In  discussing  this  subject  with  members  of  this 
organization,  what  impresses  me  more  than  anything  else  is 
how  few  of  the  managers  of  electric-light  companies  have  a 
correct  appreciation  of  the  real  capital  invested  in  their  busi- 
ness, and  consequently  the  value  of  the  property  they  are 
running. 

Since  I  have  been  here  this  week,  one  gentleman  has  asked 
me  what  I  would  do  in  a  case  where  the  actual  value  of  the 
property  was  away  below  the  amount  of  securities  outstanding, 
and  it  occurred  to  me  to  ask  him  the  amount  of  his  income. 
My  recollection  is  he  said  $140,000  or  $160,000  a  year,  gross. 
I  then  asked  him  what  his  capital  was,  and  he  said  that  the 
bonds  which  had  been  issued  were  away  beyond  the  value  of 
the  property;  the  company  had  issued  bonds  for  $550,000. 
Now  it  is  just  as  impossible  for  a  man  to  do  $140,000  or  $160,000 
of  gross  business  with  less  than  a  cash  capital  of  from  $700,000 
to  $800,000  as  it  is  for  me  to  fly  to  the  moon. 

The  best  investment  that  any  of  you  can  possibly  make  is 
to  find  out  where  you  stand.  You  are  in  the  habit  of  taking 
stock  of  material  on  hand;  now  take  stock  of  the  property  you 
have.  Do  not  attempt  to  do  it  yourselves,  because  you  have 

1.  Mr.  H.  M.  Byllesby,  of  Chicago,  read  a  paper  on  "Breadth  of  View 
in  Public- Utility  Appraisals"  before  the  National  Electric  Light  Association 
at  the  New  York  convention  on  June  Si,  1911.  In  discussing  this  paper  Mr. 
Insull  spoke  as  reported  here. 

197 


198  ADDRESSES  OF  SAMUEL  INSULL 

not  had  the  experience  that  will  enable  you  to  form  a  correct 
conclusion.  I  am  practicing  exactly  what  I  preach.  If  I  want 
a  valuation  of  the  Commonwealth  Edison  Company's  property, 
I  do  not  go  to  my  engineers  and  auditors,  or  to  the  heads  of  my 
various  departments,  but  I  call  in  an  outside  expert,  and  I 
pay  him  his  fee  to  tell  me  exactly  the  value  of  the  property  I 
am  operating. 

In  dealing  with  the  question  of  rates,  in  dealing  with  your 
relations  with  the  community  in  which  you  do  business,  in 
dealing  with  your  relations  with  different  governmental  bodies, 
if  you  know  exactly  the  value  of  the  concern  you  are  running 
you  will  find  that  you  can  make  a  trade  that  will  give  you  a 
satisfactory  return  on  the  capital  invested.  I  would  like  to 
talk  on  this  subject  all  the  afternoon,  gentlemen,  because  I 
cannot  say  too  much  to  impress  you  with  the  necessity  of  a 
proper  appraisal.  It  is  not  a  cheap  operation.  You  will 
think  you  are  spending  money  that  makes  your  profit-and-loss 
account  for  that  particular  month  when  you  pay  the  bill  look 
very  sick;  but  the  very  best  investment  that  you  can  possibly 
make  is  to  find  out  just  where  you  are.  In  the  great  majority 
of  cases  —  I  would  say  in  almost  all  of  the  cases  of  the  prop- 
erties represented  in  the  membership  of  this  organization  — 
you  will  find  that  you  have  greater  values  than  you  have 
thought.  Take  the  case  of  the  gentleman  just  cited.  He 
thinks  he  is  in  a  very  bad  hole.  He  thinks  that  with  an  issue 
of  $550,000  worth  of  bonds  it  is  impossible  to  find  $550,000  of 
property,  and  yet  I  know,  as  well  as  I  know  that  my  name  is 
Insull,  that  he  has  actually  between  $700,000  and  $800,000  of 
property,  without  valuing  the  business  as  a  going  concern. 


CANADIAN  ELECTRIC-SERVICE  PROBLEMS 
DISCUSSED  ON  CORONATION  DAY1 

riS  not  only  a  pleasure  but  a  very  great  privilege  to  me 
;o  be  present  on  this  occasion,  and  to  be  permitted  to  ad- 
dress you  on  so  important  a  day,  a  day  of  such  consequence 
to  all  English-speaking  people,  as  the  Coronation  Day  of  King 
George  V.  I  had  expected  to  have  a  little  celebration  of  my  own 
on  this  occasion  on  a  farm  on  the  prairies  of  Illinois.  That  my 
arrangements,  owing  to  your  kindly  offices,  should  have  been 
changed  so  that  I  am  allowed  to  spend  Coronation  Day  on 
British  soil  is  an  honor  that  I  shall  very  long  remember. 

It  is  not  the  privilege  of  all  Englishmen  who  seek  their 
fortunes  beyond  the  sea  to  follow  the  "all-red  route,"  or  to 
live  under  that  "little  rag  of  red,"  but  wherever  they  may  be, 
although  owing  to  the  exigencies  of  business  they  may  live 
under  other  flags,  I  think  as  one  of  them  I  can  say  that  they 
never  forget  the  Mother  Country.  Whatever  duty  and  loyalty 
they  may  feel  to  the  flag  of  their  adoption,  they  still  have 
(and  the  older  they  grow  the  stronger  the  sentiment)  a  great 
pride  in  the  traditions  of  Britain's  past,  and  in  the  greatness 
and  achievements  of  herself  and  her  children  of  the  present. 
We  have  the  greatest  possible  sympathy  for  her  in  the  time  of 
her  troubles,  and  the  profoundest  belief  and  confidence  in  the 
great  future  that  lies  before  the  English-speaking  people  who 
owe  allegiance  to  the  British  flag. 

I  have  been  particularly  impressed  with  the  character  of 
your  meetings.  Nothing  can  be  of  such  great  benefit  to  the 
industry  in  which  we  are  all  engaged,  nothing  can  be  of  such 
great  advantage  to  the  Canadian  portion  of  that  industry,  as 

1.  An  address  delivered  at  the  annual  dinner  of  the  Canadian  Electrical 
Association  in  Niagara  Falls,  Ont.,  on  June  22,  1911. 

199 


200  ADDRESSES  OF  SAMUEL  INSULL 

an  association  such  as  yours,  with  deliberations  such  as  it  was 
my  pleasure  to  listen  to  this  morning.  For  a  number  of  years 
it  has  been  my  privilege  to  take  an  active  part  hi  the  affairs  of 
the  National  Electric  Light  Association,  and  I  would  like  to 
refer  for  a  few  moments  to  the  work  of  that  association,  with 
which  you  have  become  recently  more  or  less  affiliated,  and 
tell  you  some  of  the  things  that  that  association  has  done  for 
the  industry  on  the  other  side  of  the  Gorge.1 

BENEFITS  OF  ASSOCIATION 

In  speaking  of  the  subject  I  want  you  to  bear  in  mind  that 
I  am  speaking  from  the  point  of  view  of  a  man  responsible  for 
the  investment  of  large  sums  of  money  in  electrical  enterprises, 
and  therefore  as  one  who  is  forced  to  consider  whether  associa- 
tions of  this  kind  are  likely  to  be  of  material  benefit  and  of 
financial  advantage  to  the  various  companies  such  as  you  gentle- 
men are  connected  with.  It  is  my  judgment  that  the  work  of 
the  National  Electric  Light  Association  has  done  more  for  the 
improvement  of  the  commercial  methods  and  the  engineering 
methods  of  the  electrical  industry  hi  the  United  States  than 
any  other  one  agency  since  the  early  work  of  the  inventors  who 
first  gave  us  the  various  electric-light-and-power  systems  which 
we  are  engaged  in  operating. 

This  association  has  done  much  in  the  way  of  fostering 
pleasant  relations  between  our  various  member  companies  and 
the  communities  in  which  they  do  business.  It  has  added  very 
largely  to  the  knowledge  of  our  employees,  and  consequently 
has  added  very  much  to  their  efficiency.  We  are  now  engaged 
in  endeavoring  to  introduce  schemes  among  our  member 
companies  with  reference  to  such  things  as  pensions,  savings 
funds,  insurance,  and  the  like,  for  the  purpose  of  adding  to 
the  material  welfare  of  the  employees  of  the  various  companies 
which  are  members  of  our  association. 

The  business  in  which  we  are  engaged  has  few  parallels  in 

1.  Referring  to  the  international  boundary  between  the  United  States 
and  Canada. 


CANADIAN  PROBLEMS  201 

growth  in  the  industrial  world.  Three  decades  ago  there  was 
scarcely  more  than  a  few  hundred  thousand  dollars  invested 
in  this  business,  and  today  there  is  probably  $1,750,000,000 
invested  in  the  electric-light-and-power  industry  in  the  United 
States  and  Canada.  There  are  probably  employed  by  the 
various  companies  from  100,000  to  150,000  men.  Notwith- 
standing its  remarkable  growth,  the  business  has,  on  the  whole, 
paid  handsome  returns  on  the  capital  invested. 

It  is  a  business  which  is  probably  less  affected  by  panic 
and  industrial  depressions,  which  we  must  expect  from  time 
to  time,  than  any  other  public-service  industry.  This  may  be 
partly  owing  to  the  fact  that  we  are  engaged  in  a  new  business, 
and  that  we  have  not  reached  the  point  of  saturation,  our  ef- 
forts to  extend  our  operations  being  somewhat  sharpened  when 
we  find  periods  of  depression  in  general  business  approaching. 

HYDRO-ELECTRIC  AND  STEAM  PRODUCTION  COMPARED 

Being  at  this  location,  right  in  the  center  of  what  is  popu- 
larly supposed  to  be  the  greatest  power  development  on  the 
North  American  continent,  naturally  one  would  refer  to  the 
question  of  hydro-electric  development;  but  it  happens  that 
practically  my  entire  experience,  with  the  exception  of  a  few 
isolated  cases,  has  been  confined  to  steam  development.  Some- 
times I  wonder  why  it  is  that  the  public,  whether  they  are  in 
Canada  or  the  United  States,  look  upon  Niagara  as  the  greatest 
power-production  center  in  this  country.  My  own  impression 
is  that  the  greatest  power-production  center  hi  the  United 
States,  at  the  present  time,  if  you  include  all  the  various  electric- 
light-and-power  companies  and  transportation  companies,  is 
in  the  city  of  New  York.  With  all  modesty  I  may  add  that 
I  think  the  largest  steam-electric  power-production  center  hi 
the  United  States  operated  by  one  company  is  probably  that 
of  the  company  of  which  it  is  my  honor  to  be  the  president  in 
the  city  of  Chicago. 

There  are  a  number  of  gentlemen  in  this  room  whose  business 
is  menaced  more  or  less  by  the  hydro-electric  development  on 


202  ADDRESSES  OF  SAMUEL  INSULL 

the  Canadian  side  of  the  Niagara  River.  I  want  you  when  you 
go  home  to  figure  out  what  is  your  investment  per  kilowatt  of 
maximum  output  and  divide  that  investment  into  two  classes, 
one  the  generating  investment  and  the  other  the  distribution 
investment.  You  will  find  that  your  average  investment  — 
and  I  do  not  think  that  the  proportion  is  any  different  in 
Canada  from  that  in  the  United  States  in  this  respect  —  you 
will  find  your  average  investment  in  the  distribution  system  is 
just  about  five  or  six  times  your  average  investment  in  your 
generating  plant.  So  when  you  hear  that  Niagara  power  is 
coming  into  your  territory,  and  that  the  investment  for  the 
production  of  Niagara  power  is  apparently  some  absurdly 
small  sum  per  kilowatt  of  maximum  output,  please  remember 
that  before  that  hydraulic  development  can  be  used  to  any 
extent  in  your  community  it  must  be  accompanied  by  exactly 
the  same  amount  of  dollars  invested  in  distribution  system  that 
you  have.  Your  case  is  by  no  means  so  hopeless  as  would 
appear  if  you  just  take  the  information  on  the  surface  —  the 
apparently  correct  information  —  and  do  not  go  to  the  bottom 
of  the  thing.  I  suppose  some  might  consider  that  what  I  am 
about  to  say  is  a  wild  statement  to  make;  but  I  have  thought 
for  a  good  many  years  past  that  a  steam-generating  plant 
located  in  the  city  of  Buffalo  could  compete  under  the  conditions 
under  which  energy  is  sold  in  Buffalo,  and  must  be  sold,  owing 
to  the  conditions  under  which  business  is  done,  and  the  con- 
ditions under  which  people  live,  and  so  forth;  I  have  thought 
that  such  a  plant  could  compete  with  electrical  energy  brought 
from  one  of  the  water-power  plants  here  at  Niagara  Falls. 

OPPORTUNITIES  FOR  YOUNG  MEN 

Before  I  take  my  seat  I  want  to  address  a  few  remarks  to 
the  young  men  here.  I  want  to  say  to  the  young  men  attend- 
ing this  convention  that  I  know  of  no  business  which  has  so 
great  possibilities  for  advancement  and  for  an  honorable  career 
as  the  business  that  we  are  engaged  in.  Some  might  say  that 
it  is  natural  that  I  should  make  such  a  statement  because  I 


CANADIAN  PROBLEMS  203 

know  of  no  other  business;  but  speaking  from  my  own  experi- 
ence, and  speaking  from  the  experience  of  a  great  many  young 
men  who  have  grown  up  with  me  in  this  business,  a  great  many 
men  who  today  are  looked  upon  more  as  the  fathers  than  the 
sons  of  this  industry,  I  say  I  know  of  no  business  that  affords 
greater  opportunities  for  you  young  men.  The  positions  that 
you  can  achieve,  the  advantages  that  may  accrue  to  you  in  the 
business,  rest  entirely  with  you.  You  have  before  you  the  op- 
portunity to  obtain  the  knowledge  to  fit  yourselves  to  occupy 
positions  of  prominence  in  this  industry,  and  naturally  those 
positions  must  bring  with  them  the  advantages  and  the  emolu- 
ments that  come  with  prominence  and  come  with  success.  It 
is  simply  a  question  whether  you  will  rise  to  the  occasion  when  it 
is  afforded  to  you  and  whether  you  will  grasp  the  opportunity 
that  is  before  you.  Whether  you  are  in  a  small  country  town 
or  in  a  large  city  you  should  take  advantage  of  the  opportunity 
to  gain  a  knowledge  of  the  business  that  is  right  at  your  hand. 
I  know  of  no  better  agency  to  get  that  knowledge  of  your  day- 
by-day  work  than  by  forming  a  connection  with  such  an  asso- 
ciation as  yours  or  the  National  Electric  Light  Association.  I 
know  of  no  place  where  you  can  get  better  engineering  knowl- 
edge, better  commercial  knowledge,  better  advice  as  to  what  to 
do  under  all  kinds  of  circumstances,  than  you  can  get  from  the 
National  Electric  Light  Association  and  its  affiliated  body,  the 
Canadian  Electrical  Association. 

To  those  gentlemen  here  who  are  responsible  for  the  opera- 
tion of  properties  I  want  to  say  that  they  cannot  spend  their 
companies'  money  to  better  advantage  than  by  sending  their 
young  men  to  meetings  of  this  association,  if  the  meetings  are 
of  such  a  character  as  the  one  I  attended  this  morning.  In 
offering  them  that  advice  I  am  only  practicing  what  I  preach, 
and  what  is  practiced  by  the  managers  of  all  the  large  electrical 
properties  of  the  United  States.  The  only  limit  as  to  the 
number  of  the  men  that  we  send  to  our  conventions,  and 
the  only  question  that  we  consider  at  convention  time,  is 
how  we  can  get  along  in  our  business  with  such  a  number  of 
men  absent. 


204  ADDRESSES  OF  SAMUEL  INSULL 

PUBLIC  OPINION  CANNOT  BE  NEGLECTED 

The  question  of  the  relations  between  the  public-utility 
operating  companies  and  the  communities  in  which  they 
operate  has  been  much  discussed  in  the  last  few  years.  The 
old  method  of  doing  business  was  to  assume  that  the  public 
utility  belonged  to  a  class  of  overlords  that  could  not  possibly 
make  a  mistake.  If  the  community  in  which  it  operated  was 
not  satisfied  with  its  methods,  why  the  people  must  just  put  up 
with  those  methods  just  the  same.  I  care  not  how  good  may 
be  the  franchises  under  which  you  operate,  how  long  may  be 
the  grants  you  have,  how  able  may  be  the  management  of 
your  property,  so  far  as  the  engineering  side  of  it  is  concerned, 
or  how  good  may  be  your  engineer  and  how  perfect  your  plants, 
unless  you  can  so  conduct  your  business  as  to  get  the  good  will 
of  the  community  in  which  you  are  working,  you  might  just 
as  well  shut  up  shop  and  move  away. 

This  matter  of  public  relations  is  one  that  has  been  brought 
home  to  a  great  many  industries,  not  only  public-service  in- 
dustries, but  all  classes  of  industries  in  the  United  States  in  the 
last  few  years,  and  I  think  you  people  on  this  side  of  the  line 
might  very  profitably  study  what  has  been  going  on  in  con- 
nection with  public  opinion  in  the  United  States,  and  the  rela- 
tion of  public  opinion  to  corporate  affairs.  Most  of  the  troubles 
that  have  occurred  in  the  United  States  found  their  origin  in  an 
absolute  neglect  of  public  opinion  in  the  case  of  general  indus- 
trial corporations  and  a  neglect  of  local  good  will  on  the  part  of 
the  local  public-service  corporations. 

Having  obtained  a  franchise,  if  you  are  men  dealing  with  the 
public  from  day  to  day,  the  first  thing  you  want  is  the  public's 
good  will.  If  you  are  managers  of  properties,  the  first  thing 
you  want,  on  the  part  of  your  employees,  is  to  see  that  they  do 
everything  to  get  that  good  will.  I  do  not  mean  to  say  that 
you  should  give  way  to  every  whim  or  caprice,  or  that  you 
should  bow  to  every  demand  of  the  politician  who  is  bidding 
for  public  favor.  That  is  not  at  all  necessary  in  order  to  get 
general  public  good  will.  You  have  to  remember,  as  one  of 


CANADIAN  PROBLEMS  205 

your  members  stated  in  a  paper  this  morning,  that  the  com- 
munity is  your  customer,  and  you  have  to  put  yourselves  in 
the  position  of  your  customer. 

Suppose  one  of  you  went  into  a  store  to  make  a  purchase, 
and  you  wanted  some  certain  article,  say  an  article  of  apparel, 
of  a  certain  color,  say  white.  What  would  you  think  if  the 
clerk  behind  the  counter  reached  up  for  a  roll  of  goods  and 
said,  "Well,  our  rule  is  you  have  got  to  take  green."  You 
would  walk  out  and  go  somewhere  else.  You  would  buy  the 
white  article  at  some  other  place.  There  are  many  things 
that  public-utility  companies  do  that  are  just  as  absurd  as 
that.  My  last  word  to  you  is  that  above  franchises,  above  all 
question  of  money  making  (because  customers'  good- will  will 
help  you  to  make  money),  above  all  questions  of  engineering, 
consider  your  relations  with  the  community  in  which  you  are 
working  and  in  which  you  have  got  to  live,  because  your  plant 
cannot  be  picked  up  and  moved  away. 


DUPLICATION  OF  PRODUCTION  IS 
ECONOMIC  WASTE1 

WHILE  sitting  here  and  listening  to  my  friend  Dawes2 
I  began  to  get  very  pessimistic  about  the  possibilities. 
But  he  made  one  remark  that  I  think  should  give  us 
some  hope.  He  stated  that  public-service  business  is  recog- 
nized as  a  monopoly,  a  regulated  monopoly,  and  that  therefore 
we  who  are  engaged  in  operating  public-service  industries  are 
not  subject  to  attack  to  the  extent  of  competitive  industrial 
organizations;  that  it  is  easier  for  us  to  get  capital  to  flow  into 
our  coffers.  This  is  the  first  time  that  I  ever  had  a  banker  tell 
me  that.  Mr.  Dawes  went  on  to  say  that  we  have  not  the 
trouble  that  ordinarily  exists  in  the  large  industrial  enterprises 
in  this  country.  If  he  had  been  in  the  public-service  business 
as  long  as  I  have,  he  would  probably  recall  the  fact  that  some 
twenty  years  ago  the  cure  offered  for  all  the  ills  that  the  public 
suffered  from  in  dealing  with  public-service  corporations  was 
competition.  That  would  fix  up  everything.  If  the  author- 
ities would  only  grant  new  franchises,  start  a  new  gas  com- 
pany, or  a  new  electric-light  company,  on  a  competitive  basis, 
that  would  regulate  the  situation. 

Those  of  us  who  are  in  this  room  and  who  were  in  the 
business,  as  I  was,  twenty  years  ago,  will  recall  the  fact  that  we 
challenged  that  dogma.  We  took  the  position  that  com- 
petition in  public-service  business  was  a  waste  of  capital. 

1.  During  the  annual  convention  of  the  American  Institute  of  Electrical 
Engineers  for  1911,  which  was  held  in  Chicago,  Mr.  H.  M.  Byllesby  gave  a 
dinner  at  the  Chicago  Club  to  which  many  of  the  prominent  engineers  attend- 
ing the  convention  were  invited  to  meet  several  men  of  note  in  Chicago  bank- 
ing and  business  circles.     Mr.  Insull  spoke  at  this  dinner,  and  this  chapter  is 
a  report  of  his  speech  on  that  occasion.    The  date  was  June  29,  1911. 

2.  Mr.  Charles  G.  Dawes,  president  of  the  Central  Trust  Company  of 
Illinois. 

206 


UTILIZING  DIVERSITY  207 

That  in  addition  to  its  being  a  waste  of  capital,  it  was  a  charge 
against  the  consumer,  because  capital  always  gets  its  pay.  We 
came  out  boldly  and  took  that  position  and  we  won  out.  There 
is  some  hope  for  the  industrial  corporations  if  they  will  find 
and  take  the  correct  position  in  relation  to  their  business.  They 
may  win  out. 

It  is  a  very  great  pleasure  for  me  to  have  had  the  Institute 
visit  Chicago.  It  has  not  been  my  privilege  to  be  here  at  the 
meetings  for  the  last  few  days.  I  was  called  out  of  town  and 
returned  today.  But  I  was  very  anxious  that  the  members  of 
the  Institute  should  have  the  opportunity  to  look  over  the 
business  that  it  is  my  privilege  to  be  at  the  head  of  and  to  get 
at  close  quarters  with  some  of  the  ideas  and  the  principles  that 
govern  the  conduct  of  that  business. 

During  the  few  moments  that  I  intend  to  address  you  I 
want  to  refer  to  what  we  have  been  able  to  accomplish  here 
and  the  instruments  that  have  helped  us  towards  that  ac- 
complishment, referring  to  the  policy  that  we  have  been  pur- 
suing, as  the  result  of  which  I  think  it  is  a  conservative  state- 
ment to  make  —  and  I  hope  you  will  not  charge  me  with 
egotism  in  making  it  —  that  in  this  community  the  greatest 
return  on  the  dollar  invested  is  obtained  at  the  lowest  average 
cost  to  the  user  that  is  obtained  in  any  large  center  of  popula- 
tion in  the  world  in  the  manufacture,  distribution  and  sale  of 
electrical  energy. 

THE  NEW  CONCEPTION  OF  ELECTRICITY  SUPPLY 

The  introduction  of  large  prime  movers,  the  large  generating 
units,  led  us  to  conceive  the  idea  that  the  business  of  electric- 
lighting-and-power  companies  is  to  distribute  electricity  for 
all  the  purposes  for  which  electrical  energy  can  be  used  in  the 
community.  Not  merely  to  manufacture  and  distribute  the 
energy  for  use  day  by  day  by  the  retail  user  of  light  or  the 
retail  user  of  power,  we  thought.  The  field  we  should  occupy 
was  far  larger.  We  considered  that  the  proper  function  of 
any  public-service  company  engaged  in  the  manufacture  and 
sale  of  electrical  energy  is  the  operation  of  all  the  transporta- 


208  ADDRESSES  OF  SAMUEL  INSULL 

tion  systems  in  the  city,  the  turning  of  all  the  wheels  of  industry, 
and  later,  when  the  time  comes  for  electrification  of  the  ter- 
minals of  the  great  steam  railroads  in  the  country,  to  provide 
them  with  the  necessary  energy  to  operate  their  business  and 
to  a  very  large  extent  to  distribute  it  for  them. 

Our  ideas  in  the  direction  of  the  universal  generation  and 
distribution  of  electricity  in  the  community  in  which  we  operate 
are  quickened  by  the  enjoyment  of  the  use  of  nearly  perfect 
prime  movers  owing  to  the  introduction  of  the  steam  turbine. 
When  we  started  in  to  dispose  of  energy  to  wholesale  users  we 
were  confined  to  the  unit  of  5,000  and  6,000  horse-power. 
But  the  steam  turbine  has  made  it  possible  for  us  to  avail  our- 
selves of  the  large  units  now  in  use,  running  as  high  as  20,000 
and  25,000  horse-power.  Before  next  winter's  load  comes  we 
shall  have  operating  units  up  to  certainly  30,000  horse-power, 
and  I  hope  that  within  a  very  few  years  hence  sizes  will  be  even 
larger  than  that. 

We  realized  that  there  is  a  diversity  factor  just  as  much  in 
our  business  of  wholesaling  energy  as  there  is  in  our  business  of 
retailing  energy.  The  profits  of  the  smallest  public-service 
corporation  in  this  country  are  obtained  from  the  diversity 
factor  existing  between  the  users  of  electricity;  that  is,  between 
one  small  customer  and  another.  And  we  conceived  the  idea 
of  massing  the  production  of  electricity  for  large  users  and  reap- 
ing from  them  a  profit  for  ourselves  in  supplying  them  with 
energy,  owing  to  the  diversity  factor  existing  between  the  large 
wholesale  business  and  our  general  business. 

It  is  absolutely  impossible  for  a  man  to  be  writing  at  his 
desk  at  the  same  time  that  he  is  going  down  in  an  elevator,  or  be 
going  down  in  an  elevator  at  the  same  time  that  he  is  returning 
home  in  the  street  car  or  in  the  steam  car;  hence  the  diversity 
in  demand. 

How  THE  AGGREGATE  OF  SURPLUS  ENERGY  SHOULD  BE 
UTILIZED 

In  talking  to  you  gentlemen  here,  members  of  the  American 
Institute  of  Electrical  Engineers,  I  want  to  draw  you  a  picture 


UTILIZING  DIVERSITY  209 

of  what  will  come  in  the  future  when  the  time  comes  for  the 
electrification  of  all  the  main  arteries  of  travel  throughout  this 
great  country,  and  when  the  railroad  companies  draw  their 
energy  from  the  power  houses  of  the  existing  local  companies 
which  are  now  stretched  from  the  Atlantic  to  the  Pacific  and 
almost  from  the  Arctic  Circle  to  the  Gulf  of  Mexico.  Con- 
sider all  the  great  hydro-electric  stations  and  steam-electric 
stations  now  in  operation  and  building  throughout  the  country. 
In  the  aggregate  it  means  enormous  amounts  of  surplus  energy 
at  our  disposal.  That  energy  will  be  distributed,  whether  it  is 
to  the  small  customer  who  uses  one  incandescent  lamp  or  to 
the  large  railroad  system  that  uses  100,000  or  200,000  horse- 
power and  it  will  be  distributed  eventually  by  practically  a 
single  system  of  distribution.  When  that  millennium  comes,  as 
it  must  come,  as  it  is  not  only  a  possibility  but  an  economic 
necessity, —  when  that  millennium  comes  we  shall  be  producing 
and  distributing  electricity  and  selling  it  at  the  lowest  possible 
cost  to  the  greatest  possible  number  of  consumers,  the  lowest 
possible  cost  to  the  consumer  to  be  whether  he  be  a  large  con- 
sumer or  whether  he  be  a  small  one. 

Now  take  some  of  the  great  mistakes,  from  my  point  of  view, 
that  have  been  made  in  the  electrification  —  in  what  little 
electrification  there  has  been  —  in  connection  with  our  great 
steam-railroad  properties.  Take  the  experience  of  two  such 
great  institutions  at  the  Pennsylvania  Railroad  and  the  New 
York  Central  Railroad.  A  few  years  ago  when  we  had  put 
into  operation,  I  think,  the  first  large  steam-turbine  unit  in 
our  Fisk  Street  Station,  the  New  York  Central  Railroad  sent  out 
a  most  distinguished  commission  of  electrical  engineers  and 
mechanical  engineers  to  look  into  our  methods.  What  was  the 
result?  The  Pennsylvania  Railroad  put  up  its  own  plant  and 
the  New  York  Central  Railroad  put  up  its  own  plant.  If 
you  will  investigate  the  cost  of  those  plants,  and  the  operating 
cost  of  those  plants,  and  will  charge  five  per  cent  depreciation 
and  five  per  cent  for  money  and  then  figure  out  the  cost  of  the 
electrical  energy  that  they  produce,  and  compare  their  cost  with 
the  contract  price  paid  by  the  street-railway  companies  in  the 


210  ADDRESSES  OF  SAMUEL  INSULL 

city  of  Chicago,  you  will  find  a  difference  between  the  cost  to 
those  two  steam-railroad  companies  and  the  cost  if  they  had 
purchased  their  electricity  at  the  price  we  are  in  the  habit  of 
selling  it  to  any  street-railway  company  wanting  it  here  in 
Chicago — you  will  find  a  difference  in  cost,  after  allowing  for 
interest  and  depreciation,  of  upwards  of  $1,000,000  a  year. 

RAILROAD  MAXIMUM-DEMAND  PERIOD  FAVORABLE  TO  CENTRAL- 
STATION  OPERATION 

Now  that  is  an  economic  waste;  it  is  an  economic  waste  not 
only  directly  to  those  companies,  but  indirectly  to  the  elec- 
tricity-supply companies  interested  in  the  community  where 
that  electrification  of  steam  terminals  has  taken  place.  The 
advantage  of  the  diversity  factor  between  the  two  classes  of 
business  was  lost  to  both  the  railroad  companies  and  the 
electric-service  companies.  I  have  lately  been  trying  to  find 
out  when  the  maximum  load  of  the  steam  railroads  centering 
in  Chicago  probably  occurs,  and  I  mention  this  to  elucidate 
my  point,  on  the  question  of  diversity;  that  is,  diversity  of  de- 
mand. The  only  information  that  I  have  on  which  to  base  my 
estimates  was  to  take  the  gross  cash  revenue  of  the  railroads  and 
its  variation  from  month  to  month.  Based  on  the  gross  cash 
revenue  I  find  that  the  maximum  load  of  the  steam  railroads 
comes  in  the  month  of  October  in  this  particular  neighbor- 
hood. I  have  tried  to  figure  out  from  the  same  information 
with  regard  to  the  load  on  the  steam  railroads  operating  be- 
tween New  York  and  Boston,  and  based  on  their  receipts  I 
find  that  their  maximum  business  came  in  midsummer.  I  am 
not  familiar  with  the  steam-railroad  business,  and  that  seemed 
somewhat  peculiar  to  me.  So  I  had  an  interview  with  Mr. 
Mellen,1  of  the  New  Haven  road,  and  he  told  me  the  figures 
were  correct.  He  said  that  their  maximum  load  came  at 
midsummer.  It  comes  at  that  time  because  of  the  enormous 
amount  of  passenger  business  to  the  resorts  along  the  Eastern 
Coast. 

1.  Mr.  Charles  S.  Mellen,  then  president  of  the  New  York,  New  Haven 
and  Hartford  Railroad  Company. 


UTILIZING  DIVERSITY  211 

If  the  maximum  load  of  the  steam  railroads  comes  in  the 
months,  say,  of  June  or  July,  it  seems  to  me  a  very  ridiculous 
proposition  to  provide  the  capital  necessary  to  build  individual 
generating  plants  when  at  that  same  time  all  of  the  cities  be- 
tween Boston  and  Philadelphia,  including  New  York,  have  in 
the  summer  a  maximum  amount  of  idle  generating  plants 
which  could  just  as  well  be  employed  in  taking  care  of  the 
maximum  load  of  the  steam  railroads. 

UTILIZING  THE  DIVERSITY  FACTOR  IN  DISTRIBUTING  SYSTEMS 

I  will  go  a  step  further.  If  what  I  have  said  is  true  (and  we 
think  we  have  demonstrated  its  truthfulness  so  far  as  the  local 
business  of  Chicago  is  concerned,  owing  to  the  fact  that  we  have 
been  able  to  take  care  of  our  own  business  and  three-fifths  of  the 
local  transportation  business  of  this  city  and  raised  our  load 
factor  from  28  per  cent  to  between  40  and  50  per  cent  in  doing 
it)  as  to  generating  plants,  surely  it  must  be  equally  true  in 
relation  to  the  distributing  systems.  And  in  our  distributing 
systems,  you  engineers  know  full  well,  we  spend  five  to  six 
dollars  where  we  spend  one  dollar  in  generating  plants. 

How  absurd  it  would  be  if,  instead  of  having  one  vast 
distributing  system  here  in  Chicago  for  our  regular  electric- 
light-and-power  business,  we  conceived  the  idea  of  establishing 
a  large  number  of  small  distributing  systems  running  out  from  a 
central  point.  What  would  be  the  amount  of  copper  used? 
What  would  be  the  amount  of  capital  needed  to  buy  that  cop- 
per? What  would  be  the  financial  result  on  the  balance  sheet? 

Now  we  today,  all  of  us,  pursue  exactly  that  same  absurd 
policy,  so  far  as  general  distribution  of  electrical  energy  is 
concerned.  I  think  the  best  case  that  I  can  cite  is  that  of 
New  York  city,  because  they  happen  to  have  there  a  few  more 
distributing  systems  than  we  have  here  in  Chicago.  If  you 
walk  down  the  street  in  New  York  you  will  find  one  distributing 
system  underground,  another  distributing  system  on  the  sur- 
face and  another  distributing  system  on  the  elevated  road,  and 
all  of  them  using  precisely  the  same  character  of  electrical 


212  ADDRESSES  OF  SAMUEL  INSULL 

energy  —  all  of  them  able  to  save  an  enormous  amount  of 
money  if  those  three  distributing  systems  were  put  together,  in 
precisely  the  same  way  that  we  tie  together  the  Edison  dis- 
tributing systems  in  any  of  our  large  cities. 

By  continuing  to  apply  these  same  ideas  to  the  Chicago 
situation  I  am  rather  hopeful  of  producing  and  distributing 
electrical  energy  at  the  lowest  possible  price  that  it  can  be 
produced  and  distributed  with  steam  as  the  prime  mover, 
and  as  a  result  to  surpass  the  quantity  of  production  and  dis- 
tribution in  that  of  any  other  city  from  one  central-station 
company.  The  success  which  we  have  met  with  in  massing 
the  production  of  energy  can,  I  believe,  so  far  as  economy  of 
operation  and  capital  saving  is  concerned,  be  greatly  exceeded 
by  massing  distribution. 

Fortunately  for  us,  I  think  we  have  the  opportunity  of 
doing  that  well  within  our  reach  owing  to  the  peculiar  local 
conditions  that  have  existed  in  this  community  with  reference 
to  our  transportation  properties.  I  am  having  prepared  a 
plan  for  combining  all  of  these  primary  distributing  systems. 
That  is,  instead  of  running  out  separate  cables  of  large  capacity, 
capable  of  carrying  current  of  high  potential,  first  out  to  the 
Edison  substations,  then  another  set  out  to  the  elevated-rail- 
way substations,  and  a  third  set  to  the  surface  lines  —  instead 
of  having  three  separate  systems  of  that  character  we  plan  but 
one.  Further,  the  plan  contemplates  but  one  set  of  sub- 
stations. When  you  distribute  from  that  substation  take  out 
just  the  character  of  current  you  may  require  to  use  for  a 
certain  class  of  service.  That  is,  instead  of  having  a  separate 
distributing  system  for  500-volt  current  on  the  surface  and 
another  system  on  the  elevated  structure,  to  have  it  all  one. 

What  would  be  the  result  of  working  out  such  a  plan? 
The  first  result  would  be  to  throw  out  of  use  an  enormous 
amount  of  copper.  Or,  in  other  words,  an  enormous  amount  of 
capital.  But  as  we  grow  with  reasonable  rapidity  in  this  city 
our  engineers  found  that  the  idle  investment  would  all  come 
back  into  use  again  in  the  course  of  five  years.  The  estimated 
net  result  was  that  after  five  years  a  saving  of  upwards  of 


UTILIZING  DIVERSITY  213 

$1,250,000  a  year  would  be  obtained.  This  is  the  equivalent  to 
the  creation  of  $25,000,000,  capitalizing  the  saving  at  five  per 
cent.  That  could  be  done  just  by  having  all  these  things 
together. 

If  that  is  possible  in  a  city  like  Chicago,  what  could  be  done 
in  a  city  like  New  York?  Our  maximum  load  here  at  the  pres- 
ent time  is  about  200,000  kilowatts.  I  suppose,  including  the 
generating  stations  of  other  companies,  it  would  be  not  over- 
estimating to  say  that  there  is  a  maximum  of  300,000  kilowatts 
of  electrical  energy  produced  in  central-station  generating 
plants  in  this  city.  I  do  not  know  the  amount  produced  in 
New  York.  I  presume  it  is  nearly  three  times  that,  if  you  take 
the  entire  area  of  the  present  city  of  New  York.  If  by  putting 
all  these  things  together,  doing  what  we  certainly  ought  to  do 
if  my  estimates  are  correct,  we  had  but  one  generating  and  dis- 
tributing system  in  New  York  —  if  we  could  create  values  from 
savings  in  Chicago,  which,  capitalized,  amount  to  $25,000,000 
—  what  would  be  the  value  that  could  be  created  in  New  York 
by  following  the  same  methods  of  engineering? 

MASSING  PRODUCTION  AND  DISTRIBUTION  —  WHAT  IT  MEANS 

I  think  the  most  important  subject  that  you  gentlemen 
can  engage  in  is  the  energy-manufacturing  and  energy-dis- 
tributing side  of  electrical  engineering.  Following  up  that 
subject  will  lead  to  a  far  greater  conservation  of  resources  than 
all  the  talk  we  are  hearing  with  reference  to  shutting  down  the 
water-powers  and  stopping  the  working  of  the  forests  in  the 
western  country.  This  subject  points  to  a  saving  which,  if 
you  will  take  the  whole  country,  would  be  represented  by  figures 
that  are  so  stupendous  that  a  man  would  seem  to  be  crazy 
if  he  simply  guessed  at  them.  I  know  of  nothing  that  can  lead 
to  a  greater  enlargement  of  our  business  than  following  out  the 
idea  of  massing  production  and  massing  distribution. 

It  is  a  common  thing  for  us  to  read  in  the  daily  newspapers 
of  the  great  trouble  experienced  in  providing  money  to  finance 
the  extensions  and  improvements  in  the  steam-railroad  enter- 


214  ADDRESSES  OF  SAMUEL  INSULL 

prises  in  this  country.  Even  main  trunk  lines,  with  prime 
credit,  find  their  operations  curtailed  by  the  great  difficulty  of 
getting  the  necessary  capital.  They  will  be  confronted,  within 
a  comparatively  short  time,  whether  the  men  in  charge  know 
it  or  not,  with  compulsory  electrification.  We  offer  them  a 
helping  hand;  we  offer  to  do  our  part  in  raising  the  capital 
necessary  for  that  electrification  and  for  dealing  with  that  side 
of  the  business,  namely,  the  production  and  distribution  of  the 
electrical  energy  needed  —  a  branch  of  the  business  which  the 
steam  railroads  little  understand.  However  great  may  be  their 
talent  in  railroad  management,  however  much  they  may  know 
as  to  the  conduct  of  the  transportation  business,  which  business 
is  a  specialized  business  just  as  much  as  our  business  is  a 
specialized  business,  they  can  afford  to  come  to  us  for  help. 
If  the  electrical  engineers  of  this  country  will  take  up  this  sub- 
ject in  a  proper  way  and  will  come  and  study  what  little  we  have 
been  able  to  accomplish  here  locally  in  Chicago  and  what  it 
leads  to  and  what  it  means,  they  will  find  it  means  a  future 
to  our  business  that  none  of  us  have  ever  dreamed  of. 


DINNER  IN  HONOR  OF  MESSRS.  S.  Z.  DE 

FERRANTI,  C.  H.  MERZ,  AND  ARTHUR 

WRIGHT,  OF  LONDON1 

MR.  INSULL:     Gentlemen,  I  deem  it  a  great  privilege 
to  have  the  opportunity  of  introducing  to  you  —  to 
some  of  you  —  and  to  recall  to  others  of  you  the 
acquaintance   of   my   good    friends    and    fellow-countrymen, 
Mr.  S.  Z.  de  Ferranti,  Mr.  C.  H.  Merz,  Mr.  Arthur  Wright,  and 
their  fellow-visitors,  Mr.  V.  L.  Raven,  Mr.  E.  Thompson,  and 
Mr.  H.  A.  Couves. 

It  is  somewhat  difficult  to  get  up  here  and  introduce  to 
you  Mr.  de  Ferranti  as  an  Englishman.  He  is  more  of  an 
American  than  I  am.  His  grandmother  was  born  in  Pough- 
keepsie,  and  came  of  good  old  Dutch  stock.  His  ancestry  on 
the  other  side  comes  from  that  part  of  Europe  that  is  very 

1.  On  September  28,  1911,  on  the  eve  of  their  return  voyage,  Mr.  Insull 
gave  a  complimentary  dinner  at  Delmonico's,  New  York,  in  honor  of  several 
distinguished  English  electrical  engineers  who  had  been  visiting  electrical 
points  of  interest  in  the  United  States.  A  stenographic  report  of  the  speeches 
at  that  dinner  is  presented.  Reference  to  the  work  of  several  of  the  guests  of 
the  evening  is  given  in  the  text.  It  may  be  added,  perhaps,  that  Mr.  de  Fer- 
ranti is  a  past-president  of  the  (British)  Institution  of  Electrical  Engineers 
and  that  his  ideas  in  relation  to  transforming  all  the  energy  obtained  from  coal 
into  electricity  have  been  set  forth  at  length  in  a  presidential  address  before 
that  body.  Mr.  de  Ferranti  is  one  of  five  honorary  members  of  the  American 
Institute  of  Electrical  Engineers,  and  one  of  two  (Yearbook  of  1915)  credited 
to  Great  Britain.  Mr.  Charles  H.  Merz  is  a  consulting  engineer  of  London 
and  Newcastle-upon-Tyne.  Jointly  with  Mr.  Frederick  Sargent,  of  Chicago, 
he  designed  the  addition  to  the  Fisk  Street  generating  station  of  the  Common- 
wealth Edison  Company,  of  Chicago,  put  in  operation  in  1914.  One  of  the 
generating  units  in  this  addition  is  a  25,000-kilowatt  Parsons  turbo-generator  — 
the  largest  imported  generating  unit  in  the  United  States,  both  the  steam  tur- 
bine and  the  generator  having  been  built  in  Newcastle-upon-Tyne,  England. 
The  name  of  Mr.  Arthur  Wright  is  perpetuated  in  the  Wright  demand  system 
of  charging.  The  speeches  made  at  this  dinner  and  the  list  of  the  names  of 
the  guests,  following  the  report,  are  given  here  with  the  thought  that,  with  the 
passage  of  the  years,  they  may  prove  of  historical  interest. 

215 


216  THE  DEFERRANTI  DINNER 

much  in  evidence  this  evening  in  connection  with  some  little 
disturbances  with  our  old  friend  the  Turk.1  But  it  is  a  very 
great  pleasure  for  me  to  introduce  him  here,  when  I  remember 
the  great  work  that  he  has  accomplished  in  connection  with  the 
industry  with  which  most  of  us  around  this  table  are  connected. 

REMARKABLE  EARLY  ENGINEERING  WORK  OF  FERRANTI 

While  Boston  was  building  its  direct-current  station  at 
Atlantic  Avenue,  while  Chicago  was  building  its  first  bipolar- 
dynamo  station  on  Adams  Street,  and  while  the  New  York 
Edison  Company  was  engaged  in  putting  in,  I  think,  some  of  the 
early  marine  type  of  direct-current  units,  Mr.  de  Ferranti  was 
designing  in  London  what,  from  the  engineering  point  of  view, 
is  practically  our  present-day  modern  system  of  generation. 
The  machines  that  he  put  into  the  Deptford  station,  and  which 
ran  I  think  11,000  or  12,000  volts,  of  a  rating,  I  believe  — the 
first  two  of  them — of  about  1,200  kilowatts,  and  the  conductors 
that  he  made  to  transmit  current  from  Deptford  to  the  West 
End  of  London  represented  practically  the  same  engineering 
scheme  that  we  have  today. 

It  is  a  very  remarkable  thing  that  he  should  have  foreseen 
what  is  the  absolute  essential  of  central-station  generation  and 
distribution  so  many  years  ahead  of  the  time  when  the  energy 
consumption  was  of  such  a  quantity  as  to  justify  that  class  of 
engineering.  I  have  often  said  at  similar  gatherings  that  I 
consider  Mr.  Edison's  conception  of  the  necessity  of  the  high- 
resistance  filament  in  multiple  and  the  marvelous  description  in 
his  early  distribution  patents  stamped  him  as  a  great  engineer. 
I  do  not  think  the  statement  is  far-fetched  if  I  say  that  the  con- 
ception of  the  necessities  of  our  business  worked  out  by  Mr. 
de  Ferranti  when  he  was  practically  but  a  boy,  only  a  year  or 
two  after  he  reached  manhood,  entitles  him  to  very  high  rank 
as  an  engineer  in  that  same  class. 

So  that  when  we  over  here  are  pluming  ourselves  on  our 
great  engineering  skill,  our  wonderful  conception  of  the  engineer- 

1.  Referring  to  the  war  between  Italy  and  Turkey  then  in  progress. 


THE  DEFERRANTI  DINNER  217 

ing  necessities  of  our  business,  we  should  go  back  a  quarter  of 
a  century  and  see  what  was  accomplished  in  England  at  that 
time  to  study  the  first  example  of  what  so  many  of  our  engineers 
think  was  really  born  in  this  country. 

VALUE  OF  THE  WRIGHT  DEMAND  SYSTEM 

In  addition  to  the  engineering  side  of  our  business,  we 
learned  another  very  important  thing  from  that  same  little 
isle.  Take  the  work  of  our  friend,  Mr.  Arthur  Wright.  I  do 
not  think  it  is  any  exaggeration  to  say  that  Mr.  Wright  first 
taught  us  how  to  sell  electricity.  I  think  that  the  work  which 
he  did  in  Brighton  was  the  first  daylight  which  we  received  as 
to  how  electrical  energy  should  be  sold.  I  do  not  care  whether 
it  is  in  the  homes  of  the  rich,  in  cities  like  New  York,  where 
they  can  pay  a  high  price  for  electricity  and  not  miss  the  money, 
or  in  a  city  like  Chicago,  where  we  have  to  depend  largely 
upon  the  ordinary  flat  dweller  who  can  only  afford  to  pay  $12 
or  $18  a  year.  It  makes  no  difference  whether  we  are  selling 
to  large  consumers,  such  as  we  happen  to  be  fortunate  enough 
to  have  in  Chicago,  and  they  would  like  to  have  in  New  York, 
who  buy  anywhere  from  10,000  to  50,000  kilowatts,  or  whether 
it  is  the  product  of  a  hydro-electric  plant,  from  which  energy  is 
sold  to  large  distributors.  In  all  cases  the  fundamental  basis 
of  all  the  contracts  made,  provided  these  contracts  are  made 
with  the  idea  of  making  money  by  them  —  the  fundamental 
basis  on  which  the  current  is  sold  under  all  these  conditions  is 
what  is  known  as  the  Wright  demand  system  of  selling  energy. 
We  have  to  thank  our  friend,  Mr.  Arthur  Wright,  for  teaching 
us  the  A  B  C  of  the  selling  of  electricity. 

Some  years  ago  when  we  in  Chicago  were  struggling  with  the 
problem  of  selling  electrical  energy  to  the  railway  companies, 
there  was  a  great  diversity  of  opinion  in  the  organization  of 
which  it  is  my  privilege  to  be  the  head,  as  to  how  to  do  it.  Some 
of  my  people  about  that  time  were  going  over  to  the  other  side 
—  to  work  hard,  as  they  told  me;  to  have  a  good  time,  as  I 
thought  —  and  it  happened  that  they  strayed  into  a  commit- 


218  THE  DEFERRANTI  DINNER 

tee  room  of  the  House  of  Lords.  The  committeemen  were 
considering  the  question  whether  the  houses  of  Parliament 
should  grant  certain  rights  relating  to  the  wholesaling  of 
electricity  in  the  metropolitan  area  of  London.  Unfortunately 
for  some  friends  of  mine  and  myself  the  scheme  did  not  go 
through  Parliament.  But  the  money  that  the  stockholders 
of  the  exploiting  company  subscribed  for  the  purpose  of  trying 
to  get  that  bill  through  Parliament  served  one  very  good  purpose 
about  4,000  miles  west  of  where  that  committee  of  the  House  of 
Lords  was  meeting. 

MR.  MERZ  AS  A  PIONEER  IN  SELLING  ELECTRICITY 
AT  WHOLESALE 

The  evidence  given  before  the  committee  of  the  House 
of  Lords  on  the  Administrative  County  of  London  Bill  taught 
my  people  that  there  was  money  in  selling  electrical  energy 
at  around  one  cent  a  kilowatt-hour  in  the  city  of  Chicago. 
I  have  sometimes  thought  if  the  directors  of  the  Commonwealth 
Edison  Company  had  done  their  duty  they  would  have  reim- 
bursed me  for  the  money  I  lost  in  that  particular  enterprise! 

The  evidence  given  before  that  committee  was  prepared 
by  my  friend  Mr.  Charles  H.  Merz  and  his  staff,  and  those 
companies  which  are  engaged  in  selling  electricity  on  a  large 
scale  in  this  country  to  large  users  owe  more  to  the  work  of 
Mr.  Merz  in  that  direction  than  to  any  other  one  man,  in  my 
judgment. 

You  can  well  understand,  gentlemen,  therefore,  what  a 
pleasure  it  is  and  what  a  privilege  it  is  to  me  to  make  you 
all  acquainted  with  these  gentlemen  and  their  fellow-travelers, 
and  the  pride  that  I  naturally  have  as  an  Englishman  in  f  eeling, 
in  knowing,  that  such  large  contributions  in  the  direction  of 
the  commercialization,  the  real  commercial  success  of  the  busi- 
ness that  we  are  all  engaged  in,  can  be  traced  to  the  efforts  of 
some  of  my  fellow-countrymen. 

We  have  advantages  here;  we  have  greater  possibilities; 
probably  our  people  have  greater  purchasing  capacity;  we 


THE  DEFERRANTI  DINNER  219 

have  more  rapid  development  here,  and  we  have  far  more 
rapid  increase  in  population.  In  this  country  we  are  able  to 
take  advantage,  in  a  way  that  they  are  not  in  England,  of  the 
conditions,  and  we  are  able  to  make  far  more  money  out  of  our 
business  than  the  English  operators  are  able  to  do;  but  that 
should  not  prevent  our  recognizing  that  a  great  deal  of  what  we 
do  and  what  we  have  been  able  to  accomplish  we  can  trace  to  the 
study  and  experiments  and  efforts  of  the  electrical  engineering 
profession  of  Great  Britain  more  especially,  and  also  to  the 
professional  engineering  of  Europe. 

Gentlemen,  before  calling  upon  Mr.  de  Ferranti  to  speak,  I 
want  to  drink  to  the  health  of  the  guest  of  the  evening  and  his 
associates,  and  then  we  will  ask  Mr.  de  Ferranti  to  talk  to  us. 
Here's  to  Mr.  de  Ferranti  and  his  associates! 

REMARKS  OF  MR.  S.  Z.  DE  FERRANTI 

I  feel  it  a  very  great  privilege  to  be  among  such  a  gathering 
as  I  see  around  me  this  evening  and  to  be  able  to  say  a  few 
words  to  you  on  a  subject  that  we  are  all  so  much  interested 
in.  First,  however,  I  must  take  the  opportunity  of  thanking 
our  host  very  much  indeed  for  the  kind  words  that  he  has 
said  about  my  fellow-engineers,  who  are  over  here  with  me, 
and  about  myself.  What  he  has  said  is  part  of  the  overflowing 
generosity  and  kindness  that  we  have  met  with  on  every  side 
in  this  country.  I  have  been,  of  course,  immensely  impressed 
with  your  great  engineering  work,  but  this  has  not  impressed 
me  so  much  as  the  very  kind  reception,  the  very  great  goodness, 
we  have  received  at  the  hands  of  everybody  we  have  come 
across.  Everyone  has  tried  to  do  everything  possible  to  make 
our  stay  here  really  enjoyable.  In  fact,  if  I  might  go  a  little 
further,  I  almost  would  like  to  say  that  I  feel  that  "I  have  come 
home." 

You  know  how  very  greatly  I  am  interested  in  the  matter  of 
electrical  development,  in  the  larger  uses  of  electricity,  in  fact 
in  what  I  shall  call  the  universal  application  of  electricity  to 
almost  all  purposes.  I  believe  in  this  because  I  believe  it  is  a 


220  THE  DEFERRANTI  DINNER 

great  means  of  making  savings,  of  conserving  our  natural 
resources.  I  believe  that  electricity  is  the  greatest  labor  saver 
that  has  ever  been  invented.  I  believe  it  is  only  commencing 
to  secure  that  saving  which  it  will  eventually  do  when  it  comes 
into  its  own. 

The  saving  of  our  material  resources  is  also  another  very 
great  matter.  We  are  throwing  away  and  wasting  untold 
wealth  at  the  present  time,  because  we  have  not  yet  got  to  the 
point  of  understanding  our  work  sufficiently,  or  seeing  far 
enough  into  the  future,  to  see  that  we  can  do  any  better  than 
we  do  today.  On  those  lines  electricity  will  develop  and  pro- 
gress to  an  enormous  extent;  but  it  is  not  on  those  lines  that 
electricity  came  to  be  used  and  that  electrical  engineering 
work  was  started  upon. 

The  first  real  commercial  application  of  electricity,  I  sup- 
pose, was  the  electric  telegraph.  That  was  not  really  to  take 
the  place  of  anything.  It  was  not  to  displace  the  small  engine 
in  the  works  by  means  of  an  electric  motor  which  did  its  work 
better.  It  was  to  fill  an  entirely  new  field,  to  give  us  means 
of  communication  which  had  not  been  dreamt  of  before.  That 
was  perhaps  the  first  great  application  of  electricity. 

We  then  had  a  large  industry  in  electroplating,  which  I 
think  in  order  came  along  next.  That,  although  it  gave  us 
entirely  new  articles,  and  an  entirely  new  trade,  to  a  certain 
extent  took  the  place  of  an  existing  commodity;  namely,  what 
was  known  originally  as  Sheffield  plate,  and  which  is  now  an 
almost  forgotten  thing. 

Then  we  come  along,  I  suppose,  to  the  first  applications  of 
the  electric  light,  which  was  almost  something  in  the  nature  of 
a  scientific  wonder.  It  gave  a  lot  of  brilliancy  that  had  never 
been  known  before.  It  was  naturally  expensive  and  difficult 
to  produce  with  batteries,  but  quite  a  new  thing  in  develop- 
ment. Then  came  the  idea  of  electric  light  from  central-station 
supply.  Of  course,  you  know  the  various  stages  things  have 
gone  through  in  electrical  matters,  and  you  will  see  that  they 
have  been  characterized  partly  by  supplying  an  altogether  new 
field  that  was  not  touched  before,  and  partly  by  replacing  some 


THE  DEFERRANTI  DINNER  221 

existing  system,  some  existing  style  of  filling  our  wants  which 
was  already  in  operation. 

Take  two  cases  of  that.  We  have  only  to  think  of  the 
telephone  and  its  immense  development.  That  was  entirely 
a  new  thing.  In  a  sense  it  did  away  with  telegraphing  a  bit, 
but  really  that  is  a  small  part  of  its  utility.  It  was  an  entirely 
new  field  that  was  filled  by  the  telephone.  On  the  other  hand, 
take  the  case  of  the  electric  light  as  you  know  it  today.  As  it 
was  introduced  many  years  ago,  in  incandescent  lighting,  when 
it  came  in  it  competed  with  oil  lamps  and  gas  supply. 

Well,  that  is  how  electricity  has  gone  on  from  stage  to 
stage,  until  we  have  got  to  the  present  time. 

USING  COAL  BY  THE  ELECTRIC  ROUTE 

It  does  not  require  much  persuasion  to  realize  the  immense 
expense  of  the  electrical  industry,  the  size  of  the  business,  the 
immense  amount  of  money  invested  in  a  great  sphere  of  use- 
fulness, in  the  number  of  your  wants  that  are  supplied  by  it; 
but,  notwithstanding  all  that,  it  is  only  a  very  small  thing,  when 
you  consider  what  the  possibilities  of  electricity  are.  Really, 
if  you  carry  it  to  its  ultimate  end,  when  it  is  sufficiently  far 
developed,  you  will  see  every  bit  of  coal  that  we  now  use  for 
power,  light  and  heat,  and  electro-chemical  work  —  you  will 
see,  surely,  when  our  knowledge  is  sufficiently  advanced,  all 
these  things  must  be  done  by  the  medium  of  electricity.  That 
is  to  say,  where  it  is  a  question  of  coal,  we  will  burn  our  coal 
into  electricity,  and  by  that  round-about  process  do  more 
economically  all  the  different  things  we  are  doing  in  a  more 
direct  way  today  by  coal. 

I  went  into  the  figures,  so  far  as  they  relate  to  England,  and 
so  far  as  I  could  see  there  was  not  one  per  cent  of  the  coal  which 
was  being  raised  from  the  mines  that  was  being  turned  into 
electricity  in  England.  Suppose,  say,  you  are  twice  as  well  off 
in  the  way  of  electrical  work.  I  do  not  think  that  is  so,  but 
in  relation  to  the  coal  consumption  in  this  country,  suppose  you 
are  twice  as  well  off,  and  that  two  per  cent  of  the  coal  mined 


222  THE  DEFERRANTI  DINNER 

in  this  country  today  is  being  turned  into  electricity  for  the 
general  uses  to  which  electricity  is  put.  Just  think  of  that  in 
relation  to  the  98  per  cent  which  ought  to  be  turned  into  elec- 
tricity, and  which  will  be  turned  into  electricity,  when  you 
gentlemen  have  evolved  the  means  of  doing  it. 

I  do  not  think  that  is  in  any  sense  a  fantastic  idea.  I  say  it 
in  all  seriousness,  and  before  such  a  meeting  "as  this,  that  I 
thoroughly  believe  —  I  am  quite  convinced  —  that  the  time 
will  come  when  for  all  purposes  it  will  pay  to  use  coal  by  the 
electric  route. 

I  will  not  enlarge  on  what  it  will  mean.  You  gentlemen 
represent  very  great  and  important  undertakings.  I  do  not 
know  what  the  size  of  your  industry  will  be  when  my  ideas  are 
realized,  but  it  will  be  something  very  big.  Now,  just  see  for  a 
moment  what  it  would  mean  if  we  could  do  all  our  work  electri- 
cally, and  let  us  see  what  are  the  conditions  that  would  have  to 
be  created  to  bring  that  about.  In  the  first  place,  to  make  such 
a  thing  possible  you  must  be  able  to  turn  a  much  larger  per- 
centage of  the  heat  energy  of  the  coal  into  electrical  energy. 
I  think  that  goes  without  saying.  I  do  not  imagine  that  we 
have  got  to  go  such  a  very  long  stretch  forward  before  we  will 
get  such  a  return  of  the  heat  energy  of  the  coal  in  the  form  of 
electricity  as  will  warrant  our  using  the  coal  by  electric  means 
for  practically  all  purposes. 

That  is  the  first  thing.  The  second,  of  course,  is  one  which 
can  come  only  with  time  and  practice.  That  is,  the  perfecting 
and  cheapening  of  all  the  means  of  transmission  and  transforma- 
tion. By  transformation  I  mean  the  transformation  of  the 
electrical  energy  into  the  final  result,  whether  it  is  heating, 
whether  it  is  steel,  or  some  chemical  product,  or  whatever  it  is 
that  coal  is  used  for  today.  These  things  have  got  to  be  im- 
proved, and  the  capital  costs  have  got  to  be  much  reduced, 
possibly  by  direct  improvements  of  all  the  apparatus  used  and 
partly  by  the  much  greater  scale  of  operation.  Surely,  when 
that  state  of  affairs  comes  about,  when  you  get  across  the  critical 
point  in  the  amount  of  electricity  you  can  get  from  your  coal, 
and  when  you  can  carry  out  the  applications  with  certainty, 


THE  DEFERRANTI  DINNER  223 

and  success,  and  sufficiently  reasonable  price,  then  I  feel  sure 
that  this  general  electrification  will  gradually  become  the  order 
of  the  day. 

GREAT  SAVINGS  TO  BE  EFFECTED 

What  are  the  results  that  we  can  hope  to  follow  from  such 
state  of  affairs?  I  am  not  ashamed  to  speak  of  them,  too,  this 
evening,  because,  as  I  say,  I  do  not  think  that  these  things  are 
visions  of  the  future  only.  I  think  they  are  very  much  nearer 
than  we  can  readily  imagine.  To  begin  with,  I  am  sure  such  a 
state  of  affairs  would  save  a  large  amount  of  the  coal  we  now 
use.  Of  course,  there  is  always  an  increase  going  on,  and  we 
always  want  more  coal;  but  taking  it  at  any  one  time,  I  believe 
one  might  reasonably  hope  for  a  saving  of  probably  half  the 
coal  which  we  now  use.  There  is  the  first  great  point  in  the 
conserving  of  the  natural  resources  of  any  of  the  civilized 
countries.  Secondly,  you  get  back  to  a  thing  which  follows 
from  the  better  use  of  the  coal. 

Part  of  such  a  process  as  I  have  sketched  out  to  you  would 
mean  burning  the  coal  in  such  a  way,  or  using  it  in  such  a  way, 
that  you  would  not  throw  away  the  valuable  by-products  that 
are  contained  in  it,  and  which  we  know  today  quite  well  we 
can  get  at,  and  which  we  do  get  at,  but  which  it  does  not 
generally  pay  us  to  extract  or  utilize.  The  great  thing,  as  you 
know,  in  the  coal  is  the  fixed  nitrogen,  of  which  we  get  a  com- 
paratively small  percentage  today.  If  we  were  to  get  anything 
like  a  reasonable  return  in  using  the  coal  of  the  fixed  nitrogen 
in  the  coal,  we  should  then  have  the  means  in  any  country  such 
as  this  —  in  other  countries,  no  doubt,  but  especially  in  such  a 
country  as  this — of  maintaining  our  lands  fertile  notwithstand- 
ing the  continual  use  of  those  lands,  and  without  any  diminu- 
tion in  their  value  as  producers  of  agricultural  products. 

At  present  there  is  a  great  depletion  of  the  land;  its  value 
is  being  sapped  —  I  do  not  say  by  unscientific  work,  but  owing 
to  the  fact  of  lands  being  plenty  and  there  being  plenty  more 
within  reach,  so  that  our  food  supplies  can  be  brought  from 
this  newer  land,  and  so  the  old  land  is  being  neglected,  the 


224  THE  DEFERRANTI  DINNER 

older  part  of  the  country  is  becoming  less  fertile,  and  this  is 
going  on  while  we  are  throwing  away  our  means,  ample  means, 
of  keeping  it  as  fertile  and  as  good  as  the  first  day  it  was  used. 
That  follows  as  a  part  of  the  process  which  it  would  be  nec- 
essary to  bring  about  for  a  universal  use  of  electricity. 

The  last  point  is  the  immense  labor-saving  character  of 
electricity.  If  you  are  required  to  mine  about  half  the  coal, 
there  would  be  a  very  large  saving  in  labor,  which  could  be 
turned  to  another  account.  There  are  great  difficulties,  of 
course,  in  transferring  labor  from  one  industry  to  another,  and 
there  is  much  difficulty  in  getting  men  to  adapt  themselves  to 
new  situations,  but  still  everything  saved  is  so  much  to  the  good, 
on  the  basis  of  enriching  the  country  and  making  it  more  pros- 
perous, and  that  must,  in  its  turn,  react  on  the  whole  popula- 
tion of  the  country. 

The  first  great  saving  would  be  in  the  reduction  of  the 
mining  work  necessary  to  accomplish  our  results.  The  next 
thing  is  in  burning  the  coal,  in  transmitting  the  coal  into 
energy.  I  am  not  speaking  so  much  of  hauling  it  long  distances 
to  the  centers  of  population,  or  in  distributing  it,  or  getting  it 
to  the  consumer,  but  I  refer  to  the  actual  burning  of  the  coal  in 
furnaces.  In  this  operation  you  get  the  damage  done  to  these 
furnaces;  there  is  the  trouble  of  clearing  up  the  mess  generally 
that  is  produced  there  and  in  the  cities  by  the  burning  of  coal. 
All  that  represents  a  large  amount  of  labor.  We  all  know 
it;  it  is  perfectly  apparent  to  us,  and  we  are  doing  all  we  can 
to  prevent  it  —  we  are  electrifying  more  and  more  —  but  just 
think  what  the  conditions  would  be  when  the  scheme  I  have 
outlined  is  all  complete.  Of  course,  you  know  of  what  great 
savings  have  been  made  in  the  application  of  electricity  up  to 
this  time,  in  the  way  of  motive  power  and  all  the  other  things 
which  it  has  been  applied  to.  There,  again,  you  will  come  in 
for  further  labor  saving. 

A  GREAT  RESULT  TO  LOOK  FORWARD  To 

I  must  apologize,  almost,  for  talking  to  such  an  audience  on 
such  a  subject,  because  I  have  not  been  able  to  tell  you  any- 


THE  DE  FERRANTI  DINNER  225 

thing  new;  I  have  not  been  able  to  tell  you  anything  that  you 
did  not  know  before;  but  I  have  ventured  to  take  your  time  to 
remind  you  of  some  existing  things,  and  the  things  which  may 
be  developed  in  the  future,  and  to  point  out  to  you  the  direc- 
tion in  which  I  hope  you  will  work  to  bring  about  the  results 
indicated.  Personally,  I  am  not  ashamed  to  present  these 
things  to  you,  and  I  feel  perfectly  confident  of  what  I  say.  The 
thing  I  cannot  tell  you  is  the  time  when  these  things  will  be 
realized.  If  I  could  do  it,  it  would  be  very  useful.  I  cannot 
say  quite  when  this  result  will  come  about,  but  it  will  come 
about,  and  will  come  about  as  a  result  of  such  work  as  you 
gentlemen  here  this  evening  are  doing  in  developing  the  elec- 
trical industry  from  the  point  of  manufacturing  machinery,  per- 
fecting apparatus,  bringing  electricity  to  the  door  of  the  con- 
sumer, and  instructing  him  how  to  use  it  most  economically. 
It  will  come  by  the  work  of  all  of  you,  not  by  any  one  inven- 
tion but  by  the  result  of  general  progress,  the  progress  which 
must  take  place  when  a  number  of  earnest  and  skilful  men  con- 
centrate their  endeavors  in  bringing  about  a  result. 

It  is  a  thing  I  like  to  look  forward  to  with  joy  and  pleasure. 
Electricity  has  been  my  life  work  and  hobby,  my  greatest 
delight,  and  I  have  no  doubt  your  work  in  electrical  matters 
has  taken  the  same  form  with  most  of  you.  Gentlemen,  I  hope 
the  result  I  speak  to  you  about  will  be  brought  about  by  your 
efforts  within  a  reasonable  time. 

MR.  INSULL:  Gentlemen,  the  picture  Mr.  de  Ferranti 
has  drawn  of  the  possibilities  of  the  generating  stations  and 
distribution  systems  of  this  country  is  somewhat  at  fault 
from  one  point  of  view,  and  that  is  he  has  not  indicated  to  us 
how  we  are  to  provide  the  necessary  capital  for  such  develop- 
ments. I  suppose  it  is  within  reason  to  say  that  our  business 
—  that  is,  entirely  new  developments;  I  do  not  mean  re-finan- 
cing, but  extensions  to  our  plants  to  enable  us  to  take  care  of 
business  offered  —  requires  somewhere  between  $100,000,000 
and  $150,000,000  a  year,  according  to  the  conditions  of  the 
business.  If  any  such  development  takes  place  within  our 


226  THE  DEFERRANTI  DINNER 

time  as  Mr.  de  Ferranti  speaks  of,  it  is  almost  impossible  to 
think  of  the  amount  of  money  that  will  be  needed  to  take  care 
of  the  business  that  would  be  offered  to  us.  Under  these 
circumstances,  it  is  very  natural  for  us  to  look  for  a  banker,  and 
I  have  great  pleasure  in  calling  upon  my  friend  Mr.  Frank  A. 
Vanderlip,  president  of  the  National  City  Bank  of  New  York 
City,  to  give  us  some  light  on  how  we  can  do  it. 

REMARKS  OF  MR.  FRANK  A.  VANDERLIP 

I  felt  a  good  deal  out  of  place  in  this  company  of  technical 
experts  when  I  first  came  in,  but  as  the  guest  of  the  evening  and 
I  were  "reminiscing,"  I  found  that  in  the  same  year,  when  we 
were  both  boys,  just  the  same  age,  we  each  built  a  dynamo; 
we  each  had  great  ambitions  to  go  into  the  electrical  field.  We 
each  built  a  small  dynamo  and  we  ran  one  arc  light  each.  Now, 
our  guest  went  on,  but  I  was  not  able  to  do  so,  in  that  field; 
but  recalling  these  early  ambitions  has  certainly  given  me  a 
great  fellow  feeling  for  the  work  you  are  all  doing  here,  and 
for  the  great  work  that  he  has  done. 

During  the  conversation  that  I  have  had  with  Mr.  de 
Ferranti  I  have  been  greatly  interested  in  the  story  he  has  told 
me  of  the  handicap  that  electrical  development  has  labored 
under  in  England  —  the  handicap  of  the  public  attitude  to- 
wards the  municipal  ownership  of  the  plants  there.  He  has 
labored  in  a  field  that  is  nothing  like  the  field  that  you  have 
enjoyed,  because  of  that  attitude  of  the  public. 

Now,  if  he  has  been  observing  something  of  the  political 
and  business  conditions  here,  as  he  has  the  technical  condi- 
tions, he  has  found  us  in  the  midst  of  a  most  distressing  situa- 
tion —  a  situation  wherein  the  very  foundations  of  our  in- 
dustrial conditions  are  disturbed,  because  of  the  public  attitude 
toward  industries,  because  of  the  public  attitude  toward 
monopolies,  and  of  this  public  desire  to  cure  evils,  which  the 
public  believe  exists,  by  force  of  competition. 

I  think  the  field  of  electrical  development,  perhaps,  is 
rather  happily  situated  in  regard  to  the  very  disturbing  con- 


THE  DEFERRANTI  DINNER  227 

editions  that  other  fields  of  industry  are  now  laboring  under. 
We  all  pretty  well  recognize  the  necessity  for  monopoly  in  the 
electric-light  industry.  It  is  a  recognition  of  that  feature  that 
has  enabled  us  to  make  very  considerable  strides  in  making 
popular  in  a  financial  way  investments  in  electrical  enterprises. 
For  a  good  while,  after  the  first  great  expenditures  of  capital 
were  made,  capitalists  looked  with  a  good  deal  of  disfavor  upon 
investments  of  this  character.  They  do  still.  I  am  told  that 
in  England  they  look  upon  them  with  decided  disfavor. 

We  are  only  beginning  in  a  few  cases  to  create  electrical 
securities  so  that  they  really  command  the  respect  of  most 
conservative  investors.  That  was  necessarily  so  in  the  way 
that  we  have  developed.  There  are  several  thousand  individual 
electrical  companies  operating  in  this  country,  I  think,  and 
they  have  raised  a  great  sum  of  money.  But  when  they  began 
to  unite  themselves  they  presented  a  broader  field  of  investment, 
so  that  the  investor  does  not  feel  that  it  is  necessary  for  him  to 
have  technical  knowledge  in  regard  to  the  conduct  of  the 
particular  business,  and  this  really  greatly  broadened  the  field 
for  conservative  investment  in  electrical  properties. 

INVESTORS  REQUIRE  STABILITY 

Mr.  de  Ferranti  has  said  that  present  methods  of  utilizing 
the  energy  latent  in  the  coal  are  to  be  very  much  improved. 
That  sort  of  thing  rather  frightens  the  capitalist,  after  he  has 
seen  the  scrapping  of  electric  machines  in  a  very  few  years,  after 
they  have  been  in  service  but  a  short  time.  He  has  seen  the 
danger  of  competition  coming  in  with  newer  forms  of  machinery, 
endangering  old  investments,  and  this  work  which  you  are 
all  doing  to  get  nearer  to  the  point  of  efficiency,  while  it  is 
absolutely  necessary,  must  be  vitalized  by  the  confidence  of 
capital.  There  must  be  a  feeling  on  the  part  of  the  investor 
that  there  is  a  certain  stability  in  the  investment. 

That  stability  stands  not  only  on  the  technical  excellence 
of  the  work  which  you  do,  but  it  stands,  too,  on  the  attitude 
of  the  public  towards  your  big  institutions.  We  have  a  ten- 


228  THE  DEFERRANTI  DINNER 

dency  now  toward  public-service  commissions,  toward  a 
greater  control,  and  on  the  whole  I  believe  that  development  is 
on  the  side  of  stability,  if  it  does  not  go  too  far.  It  has,  in 
some  ways,  gone  too  far  in  most  of  the  prominent  instances 
where  it  is  exercised,  but  it  has  also  brought  great  advantages, 
the  advantages  of  recognized  monopoly.  It  is  no  longer  so 
easy  to  have  "strike  corporations"  come  into  the  field  and  en- 
danger old  investments. 

You  have  before  you  a  work  that  is  just  as  important  as 
any  technical  work  which  you  are  doing  —  the  work  of  satisfying 
the  public  that  you  are  being  fair,  that  you  are  giving  the  public 
a  square  deal  and  the  sort  of  a  square  deal  that  the  public  de- 
mands. I  believe  if  you  will  give  that  square  deal,  that  you 
are  going  to  get,  on  the  whole,  fair  treatment.  You  will  not 
always  get  it,  because  the  interests  of  the  public  are  in  the  hands 
of  men  frequently  not  well  trained,  not  with  a  full  knowledge 
of  what  is  fair.  But  I  believe  you  have  got  as  important 
work  on  that  side  as  you  have  on  the  technical  side,  in  giving 
fair  treatment  to  the  public,  so  as  to  insure  fair  treatment  in 
return,  and  unless  capital  feels  certain  of  that  fair  treatment, 
the  day  which  our  guest  looks  forward  to  is  going  to  be  long 
deferred,  because  of  the  lack  of  the  vitalizing  influence  of  this 
great  amount  of  capital  which  may  be  slow  in  presenting  itself 
unless  the  conditions  are  attractive. 

MR.  INSULL:  There  is  such  an  accumulation  of  talent, 
electrical  talent,  scientific  talent,  that  we  have  around  this 
table,  that  it  is  rather  a  dangerous  thing  to  call  upon  any  par- 
ticular guest  as  a  scientist;  but  there  is  one  man  for  whom  we 
all  have  great  admiration,  and  many  of  us  have  great  affection, 
and  that  is  my  friend  Dr.  Charles  P.  Steinmetz. 

REMARKS  OF  DR.  CHARLES  P.  STEINMETZ 

Electrical  engineers  of  the  English-speaking  nations  on 
both  sides  of  the  Atlantic:  I  have  been  delighted  to  meet  Mr. 
de  Ferranti,  personally,  the  first  time  on  this  occasion,  although 


THE   DE  FERRANTI  DINNER  229 

I  knew  him  by  reputation  as  long  as  I  have  been  an  electrical 
engineer;  in  fact,  a  good  deal  longer  because,  while  I  was 
studying  the  rudiments  of  electrical  engineering,  I  was  reading 
of  the  great  work  he  had  done  in  England.  I  was  very  much 
surprised  to  find  him  relatively  such  a  young  man  —  one  whom 
I  always  regarded  as  one  of  the  early  pioneers  who  had  in  those 
bygone  ages  done  the  work  we  are  just  beginning  to  do  now; 
that  is,  to  build  the  electrical  generator  of  thousands  of  horse- 
power, and  to  transmit  electrical  energy  up  to  10,000  volts 
in  underground  cables.  I  recall  in  those  days  that  I  read  in 
prominent  electrical  papers  of  instruments  that  would  measure 
as  much  electric  current  as  is  used  to  run  an  arc  lamp. 

Well,  gentlemen,  in  the  days  which  have  elapsed  since  the 
twenty  or  more  years  ago  when  this  early  work  was  done  by 
our  friend  Mr.  de  Ferranti,  we  have  carried  the  work  in  this 
country  much  farther.  We  are  not  measuring  our  stations 
any  more  by  thousands  of  kilowatts;  we  measure  them  by  hun- 
dreds of  megohms.  We  are  running  underground  cables  for 
distances  of  hundred  of  miles,  with  voltages  higher  than  10,- 
000  volts,  although  I  do  not  question  that  some  of  my  friends 
around  the  table  here  who  have  high-voltage  underground 
cables  wish  that  their  cable  record  was  the  same  as  that  of  the 
old  Ferranti  cable  of  more  than  twenty  years  ago,  which  is 
carrying  10,000  volts  today. 

VALUE  OF  DE  FERRANTI'S  EARLY  WORK 

But  if  we  have  carried  the  work  farther  we  have  done 
what  all  good  pupils  do  when  they  leave  their  teacher's  school; 
they  apply  what  they  have  learned.  When  they  have  a  chance, 
as  in  a  new  undeveloped  country,  with  great  opportunities, 
they  may  apply  it  on  a  larger  scale  than  their  teachers  have  done, 
but  they  stand  on  the  work  of  their  teachers,  of  the  pioneers 
who  have  done  the  work,  and  to  a  very  much  larger  extent 
than  most  of  us  realize  now. 

There,  in  the  old  station,  de  Ferranti  transmitted  alternating 
current  at  10,000  volts  with  underground  cables  to  do  the  work 


230  THE  DEFERRANTI  DINNER 

of  the  city  of  London  at  that  time.  There,  too,  many  phenom- 
ena were  studied  and  recognized  and  controlled  which  have 
become  familiar  to  a  few  of  us  only  during  the  last  few  years, 
and  remind  us  of  the  Ferranti  effect  —  the  rise  of  voltage  along 
the  cable,  from  the  generator  onward,  by  the  leading  current, 
the  charging  current  of  the  cable.  I  remind  you  of  the  phenom- 
enon which  we  have  gradually  learned  to  control,  which  is  that 
the  breaking  down  of  the  insulation  is  not  the  result  of  the 
voltage  of  the  static  field  only,  but  of  the  searing  effect  at  the 
edge  of  the  static  field.  Now  we  bevel  the  rim  of  the  cable. 
That  is  an  old  effect,  observed  long  ago.  I  remind  you  that, 
where  we  protect  our  system  by  aluminum  arresters,  by  the 
most  powerful  protective  devices,  it  was  de  Ferranti  in  bygone 
ages  who  discovered  and  developed  this  method  of  protection. 
So  most  of  the  prominent  work  which  we  now  utilize  to  protect 
our  systems  dates  back  to  our  teacher's  work  during  those 
days  when  we  knew  very  little  about  electrical  engineering. 

We  have  done  these  things  on  a  larger  scale  than  was 
feasible  or  dreamed  of  in  those  early  days;  but  after  all  we 
must  recognize  that  the  work  of  the  world  today  is  not  yet 
done  by  electric  power;  it  is  done  by  steam  power,  and  only 
a  very  small  proportion  of  the  wheels  of  industry  are  run  by 
electrical  energy.  There  is  a  vast  field  which  we  still  have  to 
conquer  and  which  we  shall  conquer.  It  is  true,  at  present, 
when  we  use  coal  to  produce  electric  power  we  get  only  a  small 
percentage  of  the  energy  of  coal  back  as  electrical  energy,  one- 
tenth,  or  perhaps  one-fifth  of  it.  We  may  some  time  in  the 
future  improve  that;  but  if  only  one-tenth  or  one-fifth  of  the 
energy  of  coal  is  given  to  us  as  electrical  energy,  then,  gentle- 
men, reversing  that  process,  we  should  get  from  electrical 
energy  five  or  more  times  as  much  energy  as  heat,  for  every- 
thing is  reversible. 

In  producing  light  we  use  electrical  energy  very  largely. 
We  find  it  is  more  efficient  than  the  direct  use  of  the  chemical 
energy  of  combustion,  because  we  can  control  it  better;  we  can 
escape  the  losses  by  diffusing  the  light-giving  material  in  the 
vacuum  of  an  incandescent  lamp;  and  to  produce  electrical 


THE  DEFERRANTI  DINNER  231 

energy  for  producing  heat  we  are  not  limited  by  being  obliged  to 
provide  a  supply  of  air  to  carry  away  a  large  part  of  the  heat  as 
in  the  case  of  combustion.  There  we  can  use  the  same  remedy, 
and  can  also  reduce  the  loss  to  a  small  fraction  of  what  is  in- 
herent in  the  coal  burned,  by  limiting  the  access  of  air,  by 
bringing  up  the  vacuum  and  by  other  means.  You  see  by  our 
present  relatively  low  efficiency  of  production  of  electrical  en- 
ergy from  the  energy  of  coal,  we  could  produce,  economically, 
heat  from  it,  and  will  do  it  much  sooner  than  we  think. 


WILL  ELECTRICAL  ENERGY  RUN  THE  WORLD? 

So  there  is  a  vast  field  for  electrical  energy  —  broader 
fields  which  we  are  not  considering  to  a  large  extent.  Some 
time  in  the  future  our  coal  mines  will  be  exhausted.  Then 
electrical  energy  will  be  the  only  thing  which  can  keep  the  wheels 
of  industry  running,  or  transmit  the  power  of  the  waterfall,  of 
the  rivers,  the  tides.  Some  time  in  the  future,  the  fertility  of  our 
lands  will  be  exhausted.  Land  has  already  ceased  to  be  fertile 
in  many  parts  of  the  country,  like  our  eastern  states.  To  some 
extent  then  we  shall  have  to  rely  on  electrical  energy  to  restore 
the  fertility,  to  produce  fertility.  It  is  being  done  now,  com- 
mercially, under  very  favorable  conditions. 

With  the  advance  of  engineering,  many  of  the  things  which 
are  not  thought  of  at  the  present  time  as  being  within  the  field 
of  the  application  of  electricity  will  come  into  view.  But  then, 
all  these  developments  which  are  in  the  future,  we  hope  in  the 
near  future,  have,  as  Mr.  Vanderlip  explained  to  you,  to  depend 
on  the  financial  side  also.  In  that  direction  we  can  look  to  our 
pioneers,  men  like  Mr.  Wright,  who  have  shown  us  that  it  is 
not  merely  the  strictly  technical  side  of  distribution  of  electric 
power  which  must  be  considered,  but  that  there  is  another 
side,  the  side  of  selling.  It  is  Mr.  Wright,  our  guest,  who  is 
the  originator  of  the  theory  of  the  cost  of  electric  power,  who 
has  shown  us  its  relation  to  load  factor,  diversity  factor,  and 
demand.  We  now  apply  Mr.  Wright's  system,  as  Mr.  Insull 
has  shown  and  told  us,  with  extreme  success.  And  in  this 


232  THE  DEFERRANTI  DINNER 

manner,  you  see,  we  are  advancing  because  of  the  benefits 
which  we  have  derived  from  the  work  of  the  pioneers,  our  guests 
here  tonight,  who  honor  us  by  their  presence.  We  have  profited 
by  the  labors  of  these  gentlemen,  and  I  hope  we  will  all  see  the 
accomplishment  of  the  prediction  of  Mr.  de  Ferranti,  where  you 
really  will  be  able  to  see  electrical  energy  running  the  world. 

MB.  INSULL:  It  was  not  my  intention,  in  inviting  you 
here  this  evening,  to  have  any  considerable  number  of  speeches. 
We  have  reached  the  end  of  our  speech-making,  but  before 
dispersing,  I  am  sure  you  all  join  with  me  in  wishing  our  guests 
a  safe  return  home  and  in  expressing  the  hope  that  we  shall  have 
the  pleasure  of  seeing  them  again  in  this  country  at  a  very  early 
date.1 

1.  There  were  forty-six  guests  at  this  dinner.     Following  is  a  list  of  the 

names  of  the  gentlemen  present,  alphabetically  arranged,  the  occupational 

titles  given  being  as  of  1911: 

Anson  W.  Burchard,  Schenectady,  N.  Y.,  assistant  to  president  General 
Electric  Company. 

H.  A.  Couves,  Newcastle-upon-Tyne,  England,  engineer  Newcastle-upon-Tyne 
Electric  Supply  Company. 

Francis  B.  Crocker,  Crocker- Wheeler  Company,  Ampere,  N.  J. 

Charles  G.  Curtis,  New  York,  N.  Y.,  engineer,  inventor  of  Curtis  turbine. 

Henry  L.  Doherty,  New  York,  N.  Y.,  president  Henry  L.  Doherty  and  Company. 

Alex  Dow,  Detroit,  Mich.,  first  vice-president  and  general  manager  Detroit 
Edison  Company. 

Charles  L.  Edgar,  Boston,  Mass.,  president  Edison  Electric  Illuminating  Com- 
pany of  Boston. 

William  C.  L.  Eglin,  Philadelphia,  Pa.,  electrical  engineer  Philadelphia  Electric 
Company. 

William  L.  R.  Emmet,  Schenectady,  N.  Y.,  engineer  General  Electric  Com- 
pany. 

Louis  A.  Ferguson,  Chicago,  111.,  second  vice-president  Commonwealth  Edison 
Company. 

S.  Z.  de  Ferranti,  Grindleford,  Sheffield,  England. 

Weldon  W.  Freeman,  Brooklyn,  N.  Y.,  second  vice-president  and  general 
manager  Edison  Electric  Illuminating  Company  of  Brooklyn. 

John  F.  Gilchrist,  Chicago,  111.,  assistant  to  the  president  Commonwealth 
Edison  Company. 

John  H.  Gulick,  Chicago,  111.,  auditor  Commonwealth  Edison  Company. 

John  W.  Howell,  Harrison,  N.  J.,  engineer  General  Electric  Company. 

Charles  R.  Huntley,  Buffalo,  N.  Y.,  president  and  general  manager  Buffalo 
General  Electric  Company. 

Samuel  Insull,  Chicago,  111.,  president  Commonwealth  Edison  Company. 

George  J.  Jackson,  New  York,  N.  Y.,  vice-president  National  Conduit  and 
Cable  Company. 

Professor  Dugald  C.  Jackson,  Boston,  Mass.,  Massachusetts  Institute  of  Tech- 
nology. 


THE  DEFERRANTI  DINNER  233 

John  W.  Lieb,  Jr.,  New  York,  N.  Y.,  associate  general  manager  New  York 
Edison  Company. 

Herbert  Lloyd,  Philadelphia,  Pa.,  president  Electric  Storage  Battery  Company. 

Jesse  R.  Lovejoy,  Schenectady,  N.  Y.,  vice-president  General  Electric  Company. 

Robert  Mather,  New  York,  N.  Y.,  chairman  board  of  directors  Westinghouse 
Electric  and  Manufacturing  Company. 

Joseph  B.  McCall,  Philadelphia,  Pa.,  president  Philadelphia  Electric  Company. 

James  H.  McGraw,  New  York,  N.  Y.,  president  McGraw  Publishing  Company. 

James  R.  McKee,  New  York,  N.  Y.,  chairman  sales  committee  General  Electric 
Company. 

Samuel  McRoberts,  New  York,  N.  Y.,  vice-president  National  City  Bank. 

Charles  H.  Merz,  London,  England,  consulting  engineer. 

Sidney  Z.  Mitchell,  New  York,  N.  Y.,  president  Electric  Bond  and  Share 
Company. 

Thomas  E.  Murray,  New  York,  N.  Y.,  general  manager  New  York  Edison 
Company. 

Loyall  A.  Osborne,  Pittsburgh,  Pa.,  vice-president  Westinghouse  Electric  and 
Manufacturing  Company. 

Charles  W.  Price,  New  York,  N.  Y.,  president  Electrical  Review  Publishing 
Company. 

Professor  M.  I.  Pupin,  New  York,  N.  Y.,  Columbia  University. 

J.  R.  Raven,  mechanical  engineer  Northeastern  Railway  of  England. 

E.  Wilbur  Rice,  Jr.,  Schenectady,  N.  Y.,  vice-president  General  Electric 
Company. 

Edward  P.  Russell,  Chicago,  111.,  Messrs.  Russell,  Brewster  and  Company 
(bankers). 

Frederick  Sargent,  Chicago,  111.,  consulting  engineer  (Messrs.  Sargent  and 
Lundy). 

Professor  Charles  F.  Scott,  New  Haven,  Conn.,  Yale  University. 

Henry  G.  Stott,  New  York,  N.  Y.,  superintendent  motive  power  Interborough 
Rapid  Transit  Company. 

Frank  J.  Sprague,  New  York,  N.  Y.,  consulting  engineer. 

Charles  P.  Steinmetz,  Schenectady,  N.  Y.,  consulting  engineer  General  Elec- 
tric Company. 

R.  Thompson,  assistant  mechanical  engineer  Northeastern  Railway  of  England. 

Frank  A.  Vanderlip,  New  York,  N.  Y.,  president  National  City  Bank. 

Herbert  A.  Wagner,  Baltimore,  Md.,  vice-president  Consolidated  Gas,  Elec- 
tric Light  and  Power  Company. 

Schuyler  S.  Wheeler,  Ampere,  N.  J.,  president  Crocker- Wheeler  Company. 

Arthur  Williams,  New  York,  N.  Y.,  general  inspector  New  York  Edison  Com- 
pany. 

Arthur  Wright,  London,  England,  consulting  engineer. 


OPPORTUNITY  FOR  ADVANCEMENT1 

ON  THE  last  occasion,  about  a  year  ago,  when  I  had  the 
pleasure  of  addressing  you,2 1  told  you  that  I  hoped  that 
during  the  year  now  closing  you  would  be  able  to  double 
your  membership.  You  have  had  the  good  fortune  to  go  away 
beyond  that,  so  that  now  you  have  about  60  per  cent  of  the 
possible  eligibles  in  membership  in  this  association. 

I  think  that  this  body  is  becoming  symbolic  of  our  company 
organization.  Naturally  our  board  of  directors  looks  to  the 
executive  officers  for  the  general  management  and  direction  of 
affairs;  but  it  would  be  impossible  for  those  officers  to  attain 
the  success  that  has  rewarded  the  efforts  of  the  Commonwealth 
Edison  Company  if  it  were  not  for  the  loyal  assistance  of  the 
various  committees  in  the  organization  and  the  concentration 
of  intellect  that  these  committees  bring  to  bear  on  the  various 
problems  which  naturally  arise  in  an  enterprise  as  large  as 
ours  and  in  an  industry  as  young. 

After  all,  this  body  is  but  a  continuation  of  that  same  idea. 
The  opportunities  that  the  members  of  the  Commonwealth 
Edison  Company  Section  have  of  acquiring  information  must 
necessarily  aid  them  in  their  duties  to  the  company  for  which 
we  all  work,  and  in  a  larger  sense  the  opportunties  to  exchange 
ideas  at  the  annual  convention  of  the  National  Electric  Light 
Association  must  follow  all  the  way  down  the  line,  and  assist 
every  member  company  of  that  organization  and  every  member 
of  every  company  section  of  that  organization. 

I  shall  not  be  satisfied  myself  with  this  Commonwealth 
Edison  Company  Section  until  the  day  comes  when  every  man 

1.  Speech  at  the  annual  meeting  and  dinner  of  the  Commonwealth  Edison 
Company  Section  of  the  National  Electric  Light  Association  on  November 
1,  1911. 

2.  See  "Employees  Urged  to  Study  Economic  Questions,"  page  161. 

234 


EMPLOYEES'  OPPORTUNITIES  235 

in  the  company's  organization  who  is  eligible  for  membership 
actually  joins  the  section.  In  fact,  I  think  the  day  may  come 
when  membership  will  be  viewed  by  the  officers  of  the  company 
as  the  first  evidence  of  a  man's  desire  to  improve  himself,  and 
consequently  improve  his  usefulness  to  the  company,  and  as  a 
result  improve  his  usefulness  to  himself,  or,  in  other  words, 
improve  his  earning  power  for  his  own  benefit. 

On  previous  occasions  I  have  referred  to  the  benefits  coming 
to  members  of  this  section.  If  you  take  the  Proceedings  of  the 
National  Electric  Light  Association's  convention  alone,  they 
form  today  from  year  to  year  practically  the  textbooks  of  our 
business,  as  they  deal  with  every  branch  of  the  industry, 
whether  it  be  commercial  or  technical.  They  afford  to  every 
young  man  who  aspires  to  prominence  and  to  position  in  the 
great  industry  in  which  we  are  all  engaged  the  opportunity,  in 
connection  with  his  experience  from  day  to  day  in  his  own  work, 
to  get  the  necessary  knowledge  to  fit  him  for  the  higher  posi- 
tions, which,  instead  of  decreasing  in  number,  are  greatly 
increasing  in  number,  as  the  importance  of  our  business  in- 
creases, and  as  our  operations  grow  on  a  greater  scale  every  year. 

FROM  OFFICE  BOY  TO  VICE-PRESIDENT 

It  always  affords  me  very  great  pleasure  to  address  my  own 
people.  I  like  to  feel  that  I  am  one  of  them.  As  the  years  haye 
rolled  by  and  as  the  business  has  grown  greater  and  larger,  it  is 
impossible  for  me  to  have  that  close,  personal  familiarity  with 
all  the  people  around  me  that  I  used  to  have  in  the  early  days 
of  the  development  of  the  business.  But  it  is  a  very  great 
pleasure  to  me,  as  I  approach  the  close  of  twenty  years  of 
service  in  the  Edison  company,  to  look  around  and  see  some 
of  the  older  men  growing  gray  and  older  with  myself.  I 
hope  and  I  know  that  they  have  no  less  enthusiasm  than  they 
had  when  it  was  my  privilege  first  to  take  charge  of  this  great 
business. 

I  can  look  back  still  further  here  and  see  around  me  friends 
and  co-workers  of  almost  thirty  years  ago.  It  is  a  very  great 


ADDRESSES  OF  SAMUEL  IXSULL 

to  see  them,  and  to  see  that  as  I  have  been  fortunate 
to  advance  in  this  business  that  we  have  engaged  in, 
so  they  also  have  been  able  to  advance. 

You  may  say  that,  in  speaking  on  the  subject  of  personal 
^pmlimitr  and  advancement,  I  am  talking  on  possibly  a 
hackneyed  subject,  but  I  mention  it  because  I  want  to  em- 
phasize my  experience  and  the  experience  of  those  who  have 
grown  relatively  old  (we  all  started  young  and  we  still  like  to 
feel  that  we  are  young  in  a  way).  I  mention  it  for  the  encour- 
agement, as  I  have  said  to  you  before,  of  the  younger  men 
around  me.  There  are  just  as  great  opportunities  in  this  busi- 
ness today  as  were  offered  to  the  young  man  starting  as  an 
office  boy  in  the  old  Adams  Street  building  years  ago  and  who 
this  year  has  been  placed  in  the  highest  position  of  honor  that 
is  in  the  gift  of  this  great  industry;  namely,  president  of  the 
National  Electric  Light  Association.1  There  is  no  reason  what- 
ever why  many  of  you  in  this  room,  relatively  young,  relatively 
occupying  minor  and  obscure  positions  in  the  company's 
service,  with  really  far  greater  opportunity  for  success  than 
that  afforded  to  Mr.  Gflchrist  —  there  is  no  reason  why  you 
should  not  succeed  as  he  has  succeeded,  and  reach  the  goal 
which  he  has  reached. 


GREAT  OPPORTUNITIES  OFFERED 

There  are  a  few  things  necessary  beyond  ordinary  intelli- 
gence and  fidelity  to  the  service  you  are  engaged  in.  They  are 
ambition,  "sticktoitiveness,"  plenty  of  hard  work  and  taking 
hard  knocks.  Do  not  look  at  those  hard  knocks  from  the 
position  of  the  under  dog,  but  look  at  them  from  the  same  view- 
point that  the  schoolboy  looks  at  them,  that  the  junior  hi 
college  looks  at  them;  that  they  are  part  of  the  training  to 
make  you  resourceful,  self-reliant  men.  If  you  do  that,  if  you 
take  advantage  of  the  great  opportunities  afforded  by  an  or- 


1.  Referring  to  Mr.  Jofe  P.  defeat,  vice^preafent 
Jft  ff  T     iTiMi  iiiim  (Mi*).  *md  in  1911  president  of  th. 


at  the  Common- 
erf  the  National  Electric 


EMPLOYEES'  OPPORTUNITIES  237 

ganization  like  this,  your  prospects  are  just  as  bright  and  the 
possibilities  of  success  twenty  years  hence  are  just  as  great  as 
the  success  being  met  with  today  by  the  principal  officers  in 
our  company  organization.  As  I  have  said,  they  had  far  less 
opportunity,  far  less  chance  of  the  emoluments  that  success 
brings,  than  is  opened  to  those  like  yourselves  engaged  in  an 
industry  into  which  the  capital  of  the  country  flows  so  much 
easier  today  than  it  did  twenty  years  ago,  or  fifteen  years  ago, 
or  ten  years  ago. 

There  is  another  point  that  I  would  like  to  refer  to,  and  that 
is  the  great  influence  of  the  National  Electric  Light  Association 
in  the  direction  of  the  personal  welfare  of  its  members,  and  the 
personal  welfare  of  the  employees  of  its  member  companies. 
I  refer  to  the  great  work  that  has  been  done  in  the  last  two  or 
three  years  by  the  public  policy  committee  of  the  National 
Electric  Light  Association,  working  on  such  subjects  as  savings 
funds,  pensions  and  the  like. 

These  are  all  subjects  that  you  are  vitally  interested  in, 
and  the  amount  of  time  given  by  some  of  the  great  financial 
leaders  in  the  electrical  industry  in  connection  with  the  work 
of  the  public  policy  committee  was  referred  to  quite  at  length 
in  the  last  convention  in  New  York.  The  conferences  that 
have  taken  place  on  the  subject  of  the  welfare  of  the  men  in  the 
service  in  the  last  few  years  have  led  a  number  of  the  member 
companies,  including  the  Commonwealth  Edison  Company,  to 
take  up  such  subjects  as,  for  instance,  the  savings  fund. 

At  the  present  time,  if  my  memory  serves  me  correctly, 
you  people  in  this  room  —  as  I  suppose  that  the  Employees' 
Savings  Fund  members  are  composed  largely  of  the  men  in 
this  room  —  have  invested  in  the  company's  securities  upwards 
of  $110,000,  and  that  investment  is  going  on  at  the  rate  of 
upwards  of  $5,000  a  month,  so  that  probably  by  the  time  the 
first  five-year  term  is  up,  when  the  time  comes  for  the  first 
division  of  money  or  securities,  as  each  depositor  may  elect, 
the  chances  are  that  we  shall  probably  have  upwards  of  half 
a  million  of  dollars  of  our  employees'  money  invested  in  our 
business. 


238  ADDRESSES  OF  SAMUEL  INSULL 

EMPLOYEES  URGED  TO  INVEST  IN  THE  BUSINESS 

Now,  there  are  only  70  per  cent  of  the  men  who  are  eligible 
for  that  employees'  fund  who  save  money  from  month  to  month 
by  depositing  with  the  fund.  The  chances  are  that  if  we  had 
all  of  those  who  are  eligible,  the  amount  at  the  end  of  five  years 
would  probably  exceed  $750,000. 

I  want  to  urge  you,  next  to  your  duty  to  yourselves  in  equip- 
ping yourselves  for  the  higher  positions  in  the  business,  to 
provide  for  a  rainy  day,  to  use  your  influence  among  your 
fellow-workers,  so  that  they  will  provide  for  a  rainy  day.  In 
urging  you  to  do  this,  I  am  urging  you  to  take  a  course  that  is 
peculiarly  beneficial  to  yourselves,  and  one,  if  you  consider  it 
carefully,  that  you  will  realize  is  not  only  a  benefit  to  you  but  a 
benefit  to  those  who  are  dependent  on  you,  who  are  family 
connections  of  yours,  as  nothing  can  so  help  a  man  to  take  a 
proper  view  of  affairs  in  times  of  trouble  as  to  feel  that  he  is 
supported  by  a  respectable  bank  account.  I  know  of  no  better 
way  for  you  to  save  your  money  than  to  invest  it  in  the  busi- 
ness in  which  you  are  engaged.  If  that  business  has  the 
stability  to  justify  you  to  spend  your  time  in  its  service,  surely 
that  business  should  recommend  itself  to  you  as  one  in  which 
you  should  invest  your  money. 

I  am  particularly  anxious  to  see  the  largest  possible  owner- 
ship in  the  company  for  which  we  work  held  by  our  people 
who  contribute  toward  the  results  achieved  by  the  enterprise; 
and  it  is  for  that  reason  that  I  refer  almost  on  every  occasion 
when  I  have  the  privilege  of  addressing  you  to  the  subject  of 
the  savings  fund. 

The  board  of  directors  of  the  Commonwealth  Edison  Com- 
pany is  now  engaged  in  another  effort  somewhat  in  the  same 
direction  but  of  a  more  permanent  character,  and  possibly  of 
more  permanent  value  to  the  employees  of  the  company; 
namely,  a  pension  fund.  We  hope  to  get  in  operation  at  an 
early  date  a  scheme  that  will  reward  steady,  constant  attention 
to  work  in  performance  of  service,  and  enable  a  man,  in  ad- 
dition to  his  own  efforts  in  the  direction  of  saving,  to  look 


EMPLOYEES'  OPPORTUNITIES  239 

forward  to  having  a  competence  in  old  age  as  the  result  of  the 
service  that  he  has  rendered  to  the  corporation. 

Now,  we  are  very  much  given  to  looking  back  over  the  last 
ten  or  fifteen  or  twenty  years,  to  "reminisce"  on  the  wonderful 
progress  that  the  electric-light-and-power  industry  has  made. 
But  to  my  mind,  when  I  speak  of  the  opportunities  of  the 
future,  I  think  that  the  progress  so  far  made  is  but  a  very  small 
part  of  the  development  that  must  ultimately  take  place  in  all 
the  great  industrial  centers  and  the  territory  surrounding  those 
centers. 

We  have  tried  to  do  something  in  that  direction  here  in 
the  city  of  Chicago.  It  has  been  the  privilege  of  the  Com- 
monwealth Edison  Company  to  have  a  great  opportunity  to 
show  what  could  be  done  in  the  way  of  massing  production  and 
distribution  of  electrical  energy,  and  reducing  its  cost  as  a 
result,  giving  cheap  electricity  to  the  smallest  customer  and 
the  largest  corporation. 

I  firmly  believe  that  what  we  have  achieved  so  far  in  that 
direction  is  but  a  start  in  the  ultimate  results  that  will  be  achieved 
either  by  us,  or  by  somebody  who  follows  us,  in  the  production 
and  distribution  of  energy  for  all  kinds  of  purposes,  domestic, 
commercial,  industrial  and  transportation.  And  as  to  the  last, 
that  transportation  may  be  urban,  interburban,  or  even  inter- 
state. 

The  lessons  that  we  draw  from  the  work  that  we  have  so  far 
done  show  most  clearly  that  the  production  and  distribution  of 
energy  in  this  great  country  will  be  concentrated.  Certainly 
where  density  of  population  has  reached  at  all  a  high  point, 
say,  from  the  Atlantic  seaboard  to  the  Mississippi,  the  work 
that  we  have  done  in  the  direction  of  massing  production  shows 
most  clearly  that  the  wheels  of  industry,  whether  they  be  on  the 
permanent  way  of  a  trunk-line  railroad,  or  in  some  great  hotel 
building  like  the  one  we  are  in,1  will  be  turned  by  the  production 
of  energy  at  a  relatively  few  central  points. 

To  me,  the  outlook  is  as  bright  as  it  has  ever  been.  The 
possibilities  are  greater  than  they  have  ever  been,  and  to  you 

1.  Hotel  Sherman,  Chicago. 


240  ADDRESSES  OF  SAMUEL  INSULL 

whose  average  years  may  be  half  my  age  will  be  given  the 
opportunity  to  see  the  possibilities  brought  to  actualities. 

I  simply  appeal  to  you  to  do  your  part  so  that  you  will  be 
fitted  to  occupy  positions  that  are  prominent,  and  get  the  reward 
that  comes  to  constant  and  intelligent  service. 


CAREERS  OF  TWO  ELECTRICAL  MEN1 

THERE  is  a  great  deal  to  be  gotten  out  of  our  business 
beyond  the  mere  humdrum  of  work.  There  is  nothing 
to  my  mind  more  elevating,  whether  it  be  to  the  old 
journeyman  in  the  business  or  to  the  young  apprentice,  than  to 
meet  together,  to  listen  to  the  experiences  of  those  who  have 
had,  perhaps,  better  opportunities,  or  who  on  account  of  their 
age  have  managed  to  achieve  greater  distinction  in  the  business, 
and  to  get  from  the  remarks  and  the  presence  of  men  like  Mr. 
Byllesby  the  inspiration  that  should  lead  all  of  us  to  greater 
successes  in  the  business  in  which  we  are  engaged. 

It  is  rather  a  remarkable  thing  that  we  have  here  in  Chicago 
two  men,  one  especially  prominent  in  the  engineering  side  of 
our  business,  and  the  other  especially  prominent  in  the  financial 
side  of  the  electrical  business.  Both  of  them  started  on  their 
business  careers  at  about  the  same  time  —  one  of  them  after 
he  had  left  one  of  the  universities  of  Pennsylvania  (I  believe 
Lehigh  University,  although  I  am  not  sure),  and  the  other  after 
a  beginning  in  the  "old  country."  I  refer  to  Mr.  Byllesby  and 
Mr.  Sargent.  Mr.  Byllesby  was  a  draftsman  at  the  Wetherell- 
Corliss  Engine  Works  in  Chester,  Pennsylvania.  He  left 
those  works  to  enter  the  service  of  the  Edison  Electric  Light 
Company  of  New  York  in  the  spring  of  1881,  where  I  first 
met  him. 

Mr.  Frederick  Sargent  took  the  position  at  the  Wetherell 
Engine  Works  vacated  by  Mr.  Byllesby;  and  when  Mr.  Byllesby 
left  the  service  of  the  Edison  Electric  Light  Company  to  go 

1.  Mr.  Henry  M.  Byllesby  addressed  the  Commonwealth  Edison  Corn- 
any  Section  of  the  National  Electric  Light  Association  on  December  5,  1911, 
his  subject  being  "Public  Utilities  and  Progress."  Mr.  Insull  introduced  him 
to  the  audience,  the  greater  part  of  the  prefatory  speech  being  reproduced 
here.  This  extract  puts  the  author  in  a  new  light,  that  of  a  biographer-in-brief . 

241 


242  ADDRESSES  OF  SAMUEL  INSULL 

further  afield  in  the  electrical  industry,  Mr.  Sargent  left  the 
Wetherell  works  and  took  the  position  vacated  by  Mr.  Byllesby 
hi  New  York.  Now  as  they  have  reached  the  middle  course  in 
life,  becoming  better  known  in  their  business  and  achieving 
greater  distinction,  one,  Mr.  Sargent,  is  at  the  head  of  his  pro- 
fession, the  electrical  engineering  profession,  in  this  community, 
and  the  designer  of  our  wonderfully  economical  central  power 
stations,  and  the  other,  Mr.  Byllesby,  is  one  of  the  leaders  hi 
the  Central  West  in  the  financing  of  electrical  industries. 

I  mention  the  cases  of  these  two  gentlemen  as  examples 
to  the  members  of  the  section,  of  what  can  be  done.  They 
started  equipped,  one  with  the  ordinary  collegiate  education 
that  a  graduate  gets  in  this  country  at  our  universities;  the 
other  with  the  shop  experience  gained  in  one  of  the  great  works 
around  Glasgow  in  Scotland.  Without  any  influence,  without 
anything  back  of  them  except  then*  own  ability  and  persever- 
ance they  have  achieved  distinction  in  the  two  branches  of  the 
same  business  which  they  adopted.  I  think  what  they  have 
accomplished  should  be  an  inspiration  to  all  of  you,  and  with 
that  thought  to  leave  with  you,  I  will  conclude  and  introduce 
to  you  my  friend  Mr.  H.  M.  Byllesby. 


A  CERTAIN  HOSTILITY  TO  PUBLIC- 
SERVICE  CORPORATIONS1 

WHEN  you  asked  me  to  speak  on  the  subject  of  "Pub- 
lic-Service Corporations,"  I  naturally  assumed  that 
you  referred  to  local  public-service  corporations,  and 
I  felt  some  hesitancy  in  talking  upon  the  subject,  because  in  a 
way  I  am  touting  my  own  wares.     But  the  public  service, 
whether  it  be  in  the  hands  of  private  capital  or  whether  in  the 
hands  of  the  municipality,  is,  after  all,  one  of  the  most  important 
subjects  that  we  can  discuss. 

In  this  city  practically  all  the  public  services,  all  the  utilities 
with  the  exception  of  water  supply  and  sewage  disposal,  are 
in  the  hands  of  private  capital.  We  are  fortunate  enough  to  be 
in  the  position  where  we  probably  have  less  "water"  in  that 
capital  than  in  any  large  metropolitan  city  that  I  know  of  on 
either  side  of  the  Atlantic. 

There  is  about  $450,000,000  to  $475,000,000  invested  in 
public  services  (outside  of  the  services  run  by  the  city)  in  this 
community.  The  gross  revenue  paid  by  the  citizens  is  some- 
where between  $75,000,000  and  $80,000,000.  If  you  count  a 
man  at  his  office  and  a  man  at  his  home  as  two  individuals 
the  chances  are  that  the  public  services  of  communication,  of 
illumination  and  energy  deal  with  at  least  750,000  customers. 
And  if  you  include  the  transportation  on  surface  and  elevated 
lines,  they  deal  with  1,000,000,000  additional  customers  a  year. 

The  public  services  pay  to  the  city  and  county  and  state, 
either  in  the  form  of  taxes  or  in  the  form  of  compensation,  an 
amount  equal  to  12.5  per  cent  of  the  entire  expenses  of  the 
municipality,  the  county,  the  parks  and  the  Sanitary  District. 

Thus  the  institution  of  public  service  in  this  community  is 

1.  Speech  before  the  Commercial  Club  of  Chicago  on  December  9,  1911. 
243 


244  ADDRESSES  OF  SAMUEL  INSULL 

of  vital  importance  to  every  citizen.  The  utilities  are  owned  to 
the  extent  of  somewhere  between  60  and  70  per  cent  by  the 
people  of  this  community  or  the  people  of  this  commonwealth. 
Whenever  a  blow  is  struck  at  these  properties  it  is  struck  at  the 
people  themselves,  because  if  they  are  not  the  owners  of  the 
property,  they  are  the  customers  of  the  property;  and  any  blow 
that  is  struck  must  lead  to  increased  expense  of  operation,  and 
in  the  final  analysis  the  customer  is  the  man  who  has  to  pay  the 
bill,  as  capital  invariably  gets  it  wage,  just  as  labor  invariably 
gets  its  wage. 

Now,  what  is  the  attitude  of  the  community  toward  the 
public  service?  I  think  that  is  best  illustrated  by  the  attitude 
of  our  press.  I  have  only  to  refer  to  the  great  change  that  has 
taken  place  in  the  attitude  of  the  press  with  relation  to  indus- 
trial combinations  since  the  decision  of  the  Supreme  Court1 
showed  the  people  of  this  country  that  there  were  two  sides 
to  the  subject  of  industrial  combination. 

Immediately  after  the  decision  of  the  Supreme  Court  many 
individuals  began  to  talk  of  the  necessity  of  constructive 
legislation.  Following  that  the  serious  newspapers  of  the  coun- 
try began  to  talk  of  the  necessity  of  constructive  legislation. 
One  of  the  principal  speakers  on  that  subject  in  this  community, 
Mr.  Baker,2  has  referred  to  the  necessity  of  constructive  legisla- 
tion tonight. 

"FRIENDLY  HOSTILITY" 

If  you  will  take  the  attitude  of  the  press  toward  our  local 
public-service  corporations,  you  will  find  that  it  is  one  —  if  I 
may  use  the  term  —  of  friendly  hostility;  and  I  think  that  this 
reflects  the  feeling  of  the  community. 

I  will  give  you  one  or  two  personal  instances.  I  remember 
some  years  ago  the  rates  of  our  company  were  being  regulated. 

1.  Referring,  probably,  to  the  decision  of  the  United  States  Supreme 
Court  in  the  "Standard  Oil  case"  (Standard  Oil  Company  of  New  Jersey  v. 
United  States,  221  U.  S.  Rep.,  1). 

2.  Mr.  Alfred  L.  Baker,  a  citizen  of  Chicago  who  has  manifested  much 
interest  in  plans  for  civic  betterment. 


HOSTILITY  TO  CORPORATIONS  245 

One  of  the  self-constituted  bodies  which  thinks  its  principal 
business  (and  probably  rightly  so)  and  the  most  serious  function 
that  it  can  perform  is  to  assert  all  the  authority  and  none  of  the 
responsibility  of  municipal  government  —  this  organization 
requested  me  to  appear  before  it  and  justify  our  rates.  I  had 
such  a  good  time  that  I  asked  to  be  elected  a  member  of  that 
body,  and  I  was  "turned  down."  Why?  Because  I  am  a 
public-service-corporation  official.  That  shows  the  attitude 
toward  public-service  corporations. 

I  think  it  was  last  spring  that  we  had  quite  a  municipal 
campaign  here.  As  is  usually  the  case  when  a  subscription 
list  is  going  around,  I  was  asked  to  subscribe,  I  think,  to  both 
sides  of  that  campaign.  I  subscribed  to  one,  and  after  the 
campaign  was  over,  my  money  was  returned.  Why?  Because 
I  am  a  public-service-corporation  official.  I  think  that  shows 
the  general  attitude  of  the  community  toward  public  service. 

If  you  will  trace  that  down,  I  am  inclined  to  think  it  is 
largely  owing  to  the  general  hostility  that  used  to  exist  in  the 
community  toward  corporations.  It  was  largely  centered  on 
the  railroads  and  the  local  public-service  corporations.  That 
has  grown  less  as  the  shoe  has  pinched  a  little  harder,  and  some 
of  our  friends  in  the  industrial  world  have  come  more  or  less 
in  contact  with  the  government,  whether  it  is  state  or  interstate 
or  local. 

CHEAP  MONEY  MEANS  Low  RATES 

It  strikes  me  that  the  place  where  a  movement  to  correct 
matters  of  this  kind  should  be  started  is  in  a  club  of  this  kind. 
From  the  figures  I  have  mentioned  you  must  see  the  importance 
of  the  public  service  to  a  community  like  Chicago.  If  the 
hostility  to  the  public  service  results  in  its  being  difficult  for 
the  various  corporations  operating  the  several  branches  of 
public  service  to  obtain  money,  it  means  that  the  cost  of  service 
must  be  higher.  If  you  have  a  strong  agitation  against  your 
gas  company;  if  you  have  an  unseemly  controversy  such  as  we 
have  seen  for  the  last  year  in  this  community  with  reference  to 
the  telephone  company;  if  you  have  matters  of  this  kind  treated 


246  ADDRESSES  OF  SAMUEL  INSULL 

as  questions  of  politics,  where  the  interest  of  the  man  attacking 
the  industry  is  largely  that  of  tearing  it  down  with  the  idea  of 
building  himself  up, —  it  matters  not  how  brilliant  may  be  the 
inventions  brought  into  use,  you  will  of  necessity  have  very 
high  cost  of  service  because,  after  all,  the  cost  of  money  is  the 
largest  item  of  expense  in  figuring  the  cost  of  any  public  utility 
in  any  community. 

That  is  a  matter  which  rests  entirely  with  the  community. 
If  you  want  low  cost  of  service,  if  you  want  to  get  the  largest 
amount  of  service  in  transportation  out  of  a  nickel,  if  you  want 
to  get  the  largest  amount  of  energy  out  of  the  dollar,  if  you 
want  to  get  the  cheapest  and  best  communication  out  of  the 
money  invested  by  the  telephone  company,  you  must  put  those 
various  services  in  condition  to  obtain  their  money  in  the 
markets  of  the  world  at  the  lowest  possible  price;  and  that  you 
can  only  do  by  judicious  regulation  and  by  fostering  those 
industries  instead  of  fighting  them. 

THE  QUESTION  OF  "HOME-RULE"  REGULATION 

It  is  on  this  subject  that  I  want  to  appeal  to  the  members 
of  the  Commercial  Club  especially.  There  has  never  been  a 
time  since  the  early  days  of  civilization  that  brains  have  not 
been  in  control.  While  we  are  subject,  and  universally  sub- 
ject, to  law,  we  are  subject  to  a  system  of  regulation  here  that 
is  an  absurdity.  But  there  is  no  reason,  if  the  influence  of 
bodies  like  the  Commercial  Club  is  exerted  in  the  right  direc- 
tion —  if  they  will  consider  corporate  property  as  sacred  as 
the  property  of  the  individual  —  there  is  no  reason  whatever 
why  you  should  not  have  the  cheapest  service  in  this  community, 
because  to  my  mind  you  have  the  greatest  opportunity. 

To  go  to  the  subject  of  regulation,  the  question  of  "home 
rule"  in  this  community  has  been  ridden  to  death.  Some  years 
ago  some  distinguished  uplifting  friends  of  mine,  went  down 
to  Springfield  and  put  the  control  of  the  principal  public- 
service  bodies  in  Chicago  under  the  control  of  the  City  Council. 

I  am  not  speaking  against  regulation  and  control.     I  was 


HOSTILITY  TO  CORPORATIONS  247 

one  of  the  first  men  in  my  line  of  business  to  recognize,  some 
fifteen  years  ago,  the  futility  and  the  destructiveness  to  capital 
and  the  destructiveness  to  cheap  service,  of  competition  as  a 
means  of  regulation,  and  urged  my  brethren  in  the  public- 
service  business  throughout  the  country  to  support  govern- 
mental regulation. 

How  are  these  industries  regulated  here  ?  They  are  regu- 
lated in  campaigns  for  the  election  of  aldermen  to  the  City  Coun- 
cil, when  you  come  down  to  the  finality  of  the  thing.  It  is  not 
a  question  of  a  man's  ability  to  deal  with  the  technical  sub- 
jects that  come  before  him;  it  is  a  question  on  the  one  side 
of  a  man  being  able  to  deliver  the  greatest  number  of  speeches 
to  get  the  greatest  number  of  votes,  and,  on  the  other  side,  of 
proclaiming  that  he  is  the  only  honest  man  in  the  community. 
It  is  this  class  of  men  who  regulate  $450,000,000  of  capital,  60 
to  70  per  cent  of  which  is  owned  right  in  this  community  and 
commonwealth,  whose  business  is  vital  to  the  success  of  the 
community,  and  whose  constant  flow  of  money  into  this  com- 
munity in  the  way  of  additional  investment  from  year  to  year 
is  a  very  important  factor  in  the  industrial  enterprise  of  the 
city  of  Chicago. 

PROBLEMS  THAT  SHOULD  BE  DEALT  WITH  IN  A  BUSINESS-LIKE 

MANNER 

Notwithstanding  the  situation  here,  notwithstanding  the 
troubles  that  exist,  we  have  been  able  to  accomplish  some 
things.  We  have  heard  at  different  times  a  great  deal  about 
conservation,  appealing  to  the  imagination  by  talking  of  making 
two  blades  of  grass  grow  where  one  grows  at  present.  But 
while  the  cry  for  conservation  has  been  going  on,  we  have 
managed  in  this  community  to  get  along  with  half  a  pound 
of  coal  in  our  electric  generating  stations  where  we  used  to  get 
along  with  a  pound.  If  we  were  using  the  same  amount  of  fuel 
today  that  we  were  using  ten  years  ago,  it  would  make  a  differ- 
ence yearly  of  1,500,000  tons  being  taken  out  of  the  existing 
coal  supply  of  Illinois. 


248  ADDRESSES  OF  SAMUEL  INSULL 

I  am  naturally  more  familiar  with  my  particular  branch 
of  the  business  than  I  am  with  the  other  branches  of  public 
service,  and  I  simply  mention  the  fact  of  increased  fuel  economy 
merely  to  illustrate  my  position.  The  same  class  of  improve- 
ment has  gone  on  from  year  to  year  in  every  other  branch  of 
public  service. 

There  are  few  cities  in  this  country  where  you  can  ride  as 
far  for  five  cents  as  you  can  at  the  present  time  in  this  city, 
and  if  the  municipal  officials  of  this  city  are  seriously  anxious 
to  obtain  still  further  concession  in  that  direction,  there  will 
be  no  trouble  whatever  to  get  them  within  the  next  few  months, 
if  they  will  leave  politics  out  of  it  and  simply  deal  with  the 
question  as  a  business  proposition. 

The  influence  of  the  members  of  this  club  in  that  direction, 
to  see  that  things  are  dealt  with  in  a  business-like  manner,  to 
see  that  the  public  service  is  protected  and  fostered  just  as 
much  as  you  would  protect  and  foster  any  other  branch  of 
usefulness  in  this  community,  will,  I  am  sure,  greatly  add  to 
the  prosperity  of  Chicago  and  to  the  benefit  of  its  citizens. 


THE  NAME  OF  EDISON  A  TALISMAN1 

IT  IS  an  especial  pleasure  to  me,  apart  from  the  pleasure  of 
again  addressing  my  associates  in  connection  with  the 
business  of  H.  M.  Byllesby  &  Company,  to  rise  and  thank 
you  on  Mr.  Edison's  behalf  for  this  magnificent  audience,  an 
audience  of  appreciation  of  his  visit  on  the  occasion  of  the 
tenth  anniversary  of  H.  M.  Byllesby  &  Company. 

I  need  only  mention  the  fact  that  when  you  came  in  here 
this  evening  I  had  to  explain  to  him  that  the  splendor  of  this 
banquet  and  the  large  attendance  of  so  many  of  the  prominent 
men  in  this  community  were  tributes  to  him  and  to  his  great 
work.  I  tell  you  this  to  give  you  an  illustration  of  the  mar- 
velous modesty  of  the  man  whom  I  consider  the  greatest  private 
citizen  of  the  race  today. 

To  talk  of  his  achievements  —  I  certainly  can  do  that  in 
his  presence,  for  he  cannot  hear  what  I  am  saying  —  I  have 
simply  to  point  to  the  striking  fact  that  much  of  his  work 
has  been  in  the  direction  of  recording  and  reproducing  the  ut- 
terances of  the  human  voice,  whether  mechanically  or  elec- 
trically, and  it  stands  as  a  proof  of  a  marvelous  capacity  for 
work  on  the  part  of  a  man  who  found  it  most  difficult  to  hear 
the  results  of  his  own  experiments. 

His  achievements,  whether  we  take  one  particular  branch 
of  the  electrical  industry,  in  which  one  or  the  other  of  the  men 
bearing  these  names  you  see  around  this  room  have  been  con- 
spicuous, or  whether  we  run  the  whole  gamut  from  the  early 

1.  Thomas  A.  Edison  was  a  guest  of  honor  at  a  banquet  given  by  H.  M. 
Byllesby  &  Company  at  the  Congress  Hotel,  Chicago,  on  January  5, 1912.  The 
dinner  followed  the  third  convention  of  the  organization.  Mr.  Byllesby,  the 
toastmaster,  proposed  a  toast  to  Mr.  Edison,  which  was  drunk  standing  and 
with  great  enthusiasm.  Mr.  Edison  does  not  make  public  speeches,  and  Mr. 
Insull  responded  for  him  on  this  as  he  has  on  other  occasions. 

249 


250  ADDRESSES  OF  SAMUEL  INSULL 

days  of  telegraphic  invention  to  the  modern-day  work  —  the 
inventions  in  connection  with  the  production  and  distribution 
of  electrical  energy  —  have  surpassed  in  practically  every 
branch  the  work  of  any  one  man  in  any  particular  branch. 

WHAT  EDISON'S  WORK  MEANS  TO  THE  WORLD 

It  is  nearly  forty  years  since  Mr.  William  Orton,  the  presi- 
dent of  the  Western  Union  Telegraph  Company,  stated  that  the 
result  of  the  invention  by  Edison  of  his  quadruplex  system  was 
to  create  in  one  year,  a  year  in  the  early  seventies,  phantom 
circuits,  the  value  of  which,  had  those  circuits  (of  poles  and 
wires)  been  erected  along  the  highways  and  byways  of  the  coun- 
try, would  have  represented  in  that  year  an  expenditure  of 
$2,000,000,  and  I  think  in  the  next  year  $3,000,000. 

I  simply  mention  this  to  show  you  that  lon'g  before  many  of 
you  younger  men  were  born,  Mr.  Edison  had  done  enough  work 
to  place  his  name  securely  in  the  niche  of  fame,  and  at  that  time, 
practically  as  a  lad  (he  was  twenty-six  years  old)  he  had  scarely 
commenced  his  career  and  his  work.  Now  as  a  man  of  sixty- 
five  he  works  with  the  same  enthusiasm,  the  same  devotion 
and  the  same  ambition  to  achieve,  that  signalized  his  efforts  hi 
the  early  days  of  electrical  experimentation. 

I  think  in  no  part  of  this  world  to  which  the  efforts  of  modem 
industrialism  have  pushed  themselves  will  you  find  a  country 
where  the  name  of  Edison  is  not  a  household  word. 

But  it  is  not  my  intention  to  dwell  long  upon  the  praise  of  his 
achievements.  There  is  only  one  other  branch  of  his  work  that 
I  wish  to  refer  to,  and  that  is  the  marvelous  work  that  he  did  in 
connection  with  the  generation  and  distribution  of  electrical 
energy  and  the  development  and  establishment  of  what  we  to- 
day call  the  incandescent-lighting  system. 

It  is  not  possible  for  any  of  you  engineers  in  this  room, 
whether  you  may  be  engaged  in  electrical  illumination,  in 
laying  out  the  steam  or  electrical  distribution  of  a  factory, 
in  the  building  of  an  urban  or  interurban,  or  interstate  system 
of  transportation  —  I  say  it  is  not  possible  for  you  to  lay  out 


THE  NAME  OF  EDISON  251 

engineering  plans  in  which  you  make  use  of  Edison's  original 
distribution  ideas,  as  set  forth  in  his  early  patents  and  his 
various  systems  (which  are  the  best  practice  today  and  which 
will  be  used,  in  the  judgment  of  all  of  us,  for  all  time  hi  connec- 
tion with  the  distribution  of  electrical  energy),  without  rec- 
ognizing the  marvelous  engineering  ability  of  the  man.  This 
is  not  merely  the  ability  of  a  haphazard  investigator  or  inventor, 
but  the  marvelous  engineering  ability  that  led  the  great 
originator,  over  thirty  years  before  many  of  the  things  were 
put  in  use,  to  place  in  the  records  of  the  United  States  Patent 
Office  the  very  specifications  which  you  yourselves  are  com- 
pelled to  use  in  this  year  of  grace  1912. 

As  I  told  you,  I  prepared  no  set  speech  for  this  occasion. 
And  sitting  here  beside  him  this  evening,  sitting  here  beside 
our  old  chief  and  friend,  I  have  asked  him  to  give  me  a  few  ideas 
that  I  might  read  to  you. 

SOME  OF  EDISON'S  APHORISMS 

Edison  says:  "It  will  not  be  many  years  before  the  public 
will  hardly  know  what  coal  is.  Its  use  will  be  segregated  in 
vast  power  houses,  and  to  the  ordinary  individual  it  will  be- 
come a  curiosity,  as  all  users  will  obtain  their  light,  power  and 
heat  from  electrical  distribution  stations." 

Another  one  from  Mr.  Edison:  "When  you  consider  the 
electric  motor  has  but  one  single  moving  part  and  that  that 
rotates,  it  is  safe  to  say  the  electric  motor  will  move  the  world." 

Yet  another:  "In  a  few  years  all  the  railway  terminals  in 
the  large  cities  will  be  electrified.  In  all  mountainous  countries 
where  there  are  water  powers,  the  mam  lines  will  be  electrified, 
and  ultimately" —  and  I  would  like  to  alter  that  word,  and  say 
very  nearly,  very  early  — "the  advancement  of  science  will  be 
such  as  to  cause  all  railroads  to  be  run  electrically." 

"All  vehicle  traction  in  cities  will  in  a  few  years  be  electrical 
for  the  reason  that  the  electric  motor  has  only  one  moving  part 
and  that  has  a  rotary  motion,  whereas  a  gasoline  truck  has  two 
hundred  moving  parts." 


252  ADDRESSES  OF  SAMUEL  INSULL 

I  have  been  very  much  in  the  habit  when  addressing  people 
connected  with  H.  M.  Byllesby  &  Company  to  appeal  more 
especially  to  the  young  men.  I  prefer  to  address  myself  to 
the  young  men  because  I  am  still  foolish  enough  to  think  I  am 
nearer  to  them  than  I  am  to  the  old  men.  And  in  addressing 
the  young  men  I  do  not  know  any  better  subject,  any  better 
name  to  point  to,  than  this  talismanic  name  across  the  hall1 
which  it  has  been  my  privilege  to  work  under  for  upwards  of 
thirty-three  years. 

As  I  have  often  told  you,  and  told  my  own  people  with  the 
Commonwealth  Edison  Company,  it  is  not  possible  for  all  of 
you  to  get  to  the  top;  it  is  not  possible  for  all  of  you  engineers 
to  become  Edisons;  but  it  is  possible  for  you  to  use  the  general 
scheme,  follow  out  the  general  scheme,  to  have  the  same  am- 
bitions, to  have  the  same  power  of  continuously  sticking  at  a 
thing  that  Mr.  Edison  has  himself.  I  remember  once  sitting 
in  his  laboratory,  at  a  time  when  I  was  his  private  secretary, 
when  a  gentleman  called  on  him  and  introduced  his  son  and 
said :  "  Mr.  Edison,  I  wish  you  would  give  my  son  some  motto 
to  remember."  In  a  flash  Mr.  Edison  turned  to  the  young  man : 
"Young  man,  never  look  at  the  clock."  I  would  add  to  those 
words  and  say:  "Never  look  at  the  clock  except  in  the  morn- 
ing." 

I  asked  Mr.  Edison  to  write  down  some  message  to  the 
young  men  here,  and  I  will  read  it  to  you.  It  is  in  his  own  hand- 
writing. He  said:  "When  you  get  a  job,  pitch  in,  pay  no  at- 
tention to  time.  Get  more  interested  in  the  business  than  the 
old  man  himself.  Think  of  nothing  and  talk  of  nothing  but 
shop.  Then  when  you  want  to  leave  to  better  yourself  the 
old  man  won't  let  you.  He'll  raise  your  salary  or  take  you 
in  as  a  partner." 

CONCENTRATING  THE  PRODUCTION  OF  ENERGY 

Before  I  take  my  seat  I  would  like,  as  I  always  like,  to  blow 
my  own  trumpet  a  little  bit. 

1.  Referring  to  the  name  of  Edison  in  letters  of  light  on  the  balcony  of 
the  banqueting  room. 


THE  NAME  OF  EDISON  253 

It  was  my  privilege  this  afternoon  to  take  Mr.  Edison  to  our 
two  power  houses  down  here  on  the  Chicago  River  and  to  re- 
mind him  of  the  time  thirty-one  years  ago  [March  1,  1881] 
when  it  was  my  privilege  to  be  shown  by  him  the  first  central 
station  in  the  world.  He  said:  "How  it  has  grown  since  then! 
Of  course  it  has  grown  beyond  all  we  expected.  I  never 
dreamed  we  would  have  more  than  10,000  horse-power  units." 
I  think  at  the  time  he  showed  me  his  plant  he  probably  had 
about  10  horse-power  units,  or  maybe  20  horse-power  units. 
I  felt  very  proud  hi  showing  him  through  our  stations  and  the 
work  that  had  been  accomplished  in  the  last  few  years.  He 
asked  me  something  about  the  figures.  I  told  him  ten  years 
ago  we  had  30,000  horse-power.  Three  years  ago  we  had  about 
150,000  horse-power  and  last  night  we  had  a  load  of  300,000 
horse-power. 

That  gives  you  some  idea  of  the  great  growth  that  has  taken 
place  in  this  community.  But  if  you  will  place  parallel  to  that 
the  growth  that  has  taken  place  in  the  various  plants  and  cor- 
porations controlled  by  H.  M.  Byllesby  &  Company,  which  to 
a  very  large  extent  are  located  hi  centers  where  the  growth  in 
population  is  far  greater  than  it  is  in  Chicago,  you  will  find 
that  those  figures,  although  they  may  sound  very  large  when 
the  fact  that  they  exist  in  one  great  central  station,  or  rather 
in  one  great  centralization  of  power  in  one  state  is  considered, 
are  relatively  small  in  comparison  with  your  own  figures.  I 
asked  Mr.  Edison  what  he  thought  would  occur  in  the  next 
ten  years  or  twenty  years  in  our  line  of  business.  He  said  that 
he  thinks  within  our  own  time  practically  every  wheel  of  indus- 
try, practically  every  wheel  of  transportation,  will  be  operated 
from  a  central  station. 

I  am  firmly  convinced  of  this  from  our  experience  here  in 
Chicago.  It  is  not  an  economical  proposition  to  produce 
energy  for  use  in  a  community — in  any  district,  we  will  say, 
with  any  considerable  density  of  population  —  except  under  one 
organization. 

That  is  the  course  toward  which  we  are  working.  You 
young  men  here  have  far  greater  opportunities  for  achievement 


254  ADDRESSES  OF  SAMUEL  INSULL 

with  the  work  that  must  take  place  in  the  next  twenty  years 
than  those  of  us  who  have  been  engaged  in  this  business  for  the 
last  three  decades. 

All  I  ask  of  you  is  to  take  that  name  (indicating  the  name  of 
Thomas  A.  Edison)  as  your  inspiration,  as  those  of  us  who  are  in 
prominent  positions  in  this  business  today  have  been  fortunate 
enough  to  take  it  during  the  last  thirty  years. 


THE  RELATION  OF  CENTRAL-STATION 

GENERATION  TO  RAILROAD 

ELECTRIFICATION 1 

I  AM  NOT  going  to  discuss  the  question  of  the  practicability 
of  steam-railroad  electrification.  That  is  not  a  matter  at  all 
within  my  province.  That  is  a  matter  that  has  to  be  de- 
cided by  those  great  captains  of  industry  who  are  in  control  of 
the  vast  transportation  companies  in  this  country  from  the 
Atlantic  to  the  Pacific.  But  it  is  reasonable,  as  a  central- 
station  man,  that  I  should  assume  that  the  electrification  of 
steam  railroads  has  come  to  stay;  that  the  work  done  by  the 
two  premier  trunk  lines  centering  in  New  York  is  a  sufficient 
indication  of  what  we  may  expect  in  the  future.  I  am  not  in 
sympathy  with  an  agitation  to  force  the  steam  railroads  in  this 
country  to  electrify.  That  is  a  question  of  the  provision  of  the 
capital  necessary  for  the  purpose,  and  that  question  must  be 
taken  up  and  settled  by  those  who  are  responsible  for  the  opera- 
tion of  the  railroad  properties.  Nor  am  I  going  to  discuss  what 
might  be  termed  the  technique  of  the  electrification  of  steam 
railroads;  that  is,  the  special  system  that  should  be  used, 
whether  it  should  be  done  with  one  class  of  current  or  another, 
or  one  pressure  or  another.  The  system  finally  decided  on 
must  be  the  one  which  fills  conditions  of  railroad  operation, 
and  at  the  same  time  renders  it  possible  for  the  railroad  com- 

1.  One  of  the  most  important  of  Mr.  Insull's  addresses  was  that  delivered 
before  the  American  Institute  of  Electrical  Engineers  in  New  York  on  April 
5,  1912,  and  reprinted  here.  President  Ganp  Dunn  presided  at  the  meeting, 
introducing  first  Mr.  Frank  J.  Sprague,  chairman  of  the  railway  committee, 
who  had  requested  Mr.  Insull  to  give  the  Institute  the  results  of  his  experiences. 
Mr.  Sprague  spoke  in  laudatory  terms  of  the  work  accomplished  in  Chicago  by 
Mr.  Insull  and  his  associates.  An  animated  discussion  followed  the  presenta- 
tion of  the  address,  and  a  brief  account  of  the  debates'in  both  New  York  and 
Boston  will  be  found  on  subsequent  pages. 

255 


256  ADDRESSES  OF  SAMUEL  INSULL 

pany  to  take  advantage  of  the  sources  of  energy  supply  already 
existing,  as  the  railroad  demand  is  only  about  15  to  20  per  cent 
of  the  total  demand  for  energy  in  any  community.  That 
amount  of  energy  which  the  railroads  require  to  operate  their 
properties  is  really  the  thing  that  should  turn  them  to  central- 
station  men  for  assistance,  and  I  speak  as  a  central-station  man. 
The  amount  of  energy  required  to  operate  the  terminal  and 
surburban  systems  of  all  the  trunk  lines  centering  in  and  around 
New  York  city  (as  I  think  I  will  be  able  to  demonstrate  to  you) 
is,  I  believe,  less  than  the  amount  of  energy  required  to  operate 
the  isolated  electric-lighting  plants  in  the  same  territory.  It  is 
not  a  serious  proposition.  To  my  mind  it  is  of  less  consequence 
to  the  properly  operated  electricity-supply  company  than  the 
isolated-plant  business  was  to  the  electric-light-and-power  com- 
panies through  the  country  twenty  years  ago,  or  even  fifteen  or 
ten  years  ago. 

A  QUESTION  OF  ECONOMICS 

The  problem  of  the  relation  of  the  central  station  to  the  gen- 
eration and  primary  distribution  of  energy,  so  far  as  the  steam 
railroads  are  concerned,  is  a  question  of  economics.  It  cannot 
properly  be  considered  without  taking  into  account  the  entire 
question  of  generation  and  primary  distribution  for  any  given 
center  of  population.  If  you  consider  steam-railroad  electri- 
fication by  itself,  the  amount  of  energy  required  seems  to  be 
very  great  indeed.  If  you  consider  it  merely  as  a  fraction  of  the 
supply  of  energy  required  by  a  community  for  all  kinds  of  pur- 
poses, it  is  found  to  be  simply  an  incident.  Perhaps  a  more  accu- 
rate title  for  this  paper  would  be  "The  Generation  and  Primary 
Distribution  of  Energy  for  Given  Areas,"  because  that  is  the  real 
question  involved.  It  is  not  a  new  subject;  it  is  a  subject  dealt 
with  at  great  length  hi  the  presidential  address  of  1910  by  my 
friend  Mr.  de  Ferranti,  when  addressing  our  sister  organization, 
the  (British)  Institution  of  Electrical  Engineers.  Mr.  de  Fer- 
ranti went  farther  than  I  am  going  in  this  discussion.  He  pro- 
posed a  scheme  of  generation  and  distribution  for  the  whole  of 
Great  Britain.  He  proposed  a  scheme  that  meant,  in  his 


RAILROAD  ELECTRIFICATION  257 

opinion,  a  saving  of  80,000,000  to  90,000,000  tons  of  coal  a  year 
for  Great  Britain.  If  the  plan,  which  you  must  necessarily 
admit  is  reasonable,  after  studying  the  maps  and  curves  pre- 
sented, were  adopted  in  this  country,  my  judgment  is  that  it 
would  mean  the  greatest  conservation  of  one  of  the  most  im- 
portant natural  resources  of  the  country,  fuel,  to  the  extent, 
probably,  of  from  100,000,000  to  150,000,000  tons  of  coal  per 
year. 

The  method  of  concentration  of  generation  and  distribution 
of  primary  power,  as  I  said,  is  not  a  new  subject.  It  has  been  an 
absolute  necessity  in  all  the  smaller  communities  of  this  country. 
First,  in  the  small  communities  they  formed  companies  to  do  the 
public  lighting;  next  they  added  to  that  the  incandescent-light- 
ing business;  a  little  later  they  added  the  power  business;  then 
they  connected  up  two  or  three  small  towns  together;  and  today 
the  average  prosperous  small  local  company  supplies  energy  not 
only  for  lighting,  whether  for  domestic  or  commercial  or  public 
purposes,  but  for  power,  for  pumping  water,  and  for  the  urban 
and  interurban  transportation,  and  as  a  result  has  raised  its  load 
factor  from  about  20  per  cent,  when  it  was  engaged  solely  in  the 
lighting  business,  to  from  40  to  50  per  cent  today.  That  method 
of  concentration  of  generation  is  going  on  to  such  an  extent  in 
the  smaller  communities  throughout  this  country  that  I  know  of 
cases  where,  in  an  area  of  15,000  square  miles,  that  is,  an  area 
150  miles  one  way  by  100  miles  another  way,  they  seriously 
have  in  contemplation  doing  away  with  possibly  100  to  120  gen- 
erating stations,  and  replacing  them  with  ten  or  twelve  stations. 

TAKING  ENERGY  FROM  ONE  SOURCE  OF  SUPPLY 

Where  there  are  large  water-powers  adjacent  to  the  larger 
cities,  you  find  no  hesitation  on  the  part  of  the  railway  company, 
the  electric-light-and-power  company  and  the  electrified  steam- 
railroad  company,  if  there  be  such  in  that  vicinity,  taking  their 
energy  from  one  source  of  supply.  Is  there  any  reason  why 
the  power  generated  at  Niagara  Falls  can  be  used  alike  for  all 
these  enterprises,  whether  they  be  local  public-service  enter- 


258  ADDRESSES  OF  SAMUEL  INSULL 

prises,  state  public-service  enterprises,  or  interstate  enterprises 
—  is  there  any  peculiarity  about  the  fact  that  the  power  is  gen- 
erated hydraulically?  Is  that  any  special  reason  why  these 
various  industries  should  all  take  their  energy  from  a  given 
source?  Is  it  not  just  as  reasonable  that  they  should  all  take 
their  energy  from  a  given  source,  if  that  power  is  supplied  from 
fuel,  from  coal,  with  steam  turbines  as  the  prime  movers,  as 
that  they  should  do  this  when  the  power  is  supplied  from  water 
with  hydraulic  turbines  as  prime  movers?  I  cannot  see  any 
reason,  if  concentration  of  production  is  the  correct  principle 
in  one  case,  why  concentration  of  production  is  not  the  correct 
principle  in  every  case. 

I  have  naturally  taken  for  the  purposes  of  my  discussion 
the  information  which  the  engineers  of  public-service  enter- 
prises in  New  York  have  placed  at  my  disposal,  together  with 
the  information  that  I  naturally  am  able  to  obtain  from  my  own 
operations  in  Chicago.  The  conclusion  that  I  have  come  to 
is  that  the  concentration  of  the  production  of  energy,  for  all 
purposes  required  in  a  given  area  about  any  large  center  of 
population,  would  result  in  such  a  saving  in  capital  and  such 
a  saving  in  operating  expenses  as  to  provide  sufficiently  for 
the  generating  capacity  and  primary  transmission  systems 
necessary  to  electrify  the  terminal  systems  and  suburban  ser- 
vice of  all  the  trunk  lines  centering  in  and  around  that  center  of 
population.  Particularly  is  this  true  in  the  case  of  New  York. 
Furthermore,  the  saving  would  be  such  as  to  yield  very  large 
profits,  in  addition,  to  the  engineers  and  financiers  having  the 
courage  to  handle  so  great  a  problem. 

The  percentage  of  saving  is  comparatively  small.  On  a 
percentage  basis  I  may  say  that  the  percentage  of  saving  in 
Greater  New  York  (and  in  "Greater  New  York"  I  include 
that  part  of  the  Jersey  shore  that  would  naturally  be  considered 
a  part  of  a  Greater  New  York)  is  comparatively  small,  and  to 
my  mind  somewhat  disappointing,  owing  to  peculiar  conditions 
which  I  will  explain  later.  But  the  saving  itself  is  so  large  and 
amounts  to  such  a  great  sum  of  money,  capitalized,  that  I  can- 
not see  how  it  is  possible,  whatever  may  be  the  jealousies  of 


RAILROAD  ELECTRIFICATION  259 

management,  and  whatever  may  be  the  individual  interests 
of  the  financial  people  operating  the  various  properties  —  both 
as  engineers  desiring  to  get  the  greatest  possible  results  out  of 
their  work,  and  as  capitalists  wanting  to  supply  the  greatest 
possible  amount  of  service  at  the  lowest  possible  cost  to  the 
public  and  the  greatest  possible  profit  to  themselves  —  I  can- 
not see  how  either  the  engineers  or  the  financiers  can  neglect 
the  subject  and  let  it  pass  by,  as  it  is  one  of  the  greatest  oppor- 
tunities I  know  of  in  our  business. 

THE  NEW  YORK  SITUATION 

To  take  up  now  the  illustrative  curves,  Fig.  1  is  the  New 
York  total-load  diagram.  It  includes  the  present  electrical 
load  of  the  central  stations  in  Greater  New  York  and  the 
central  stations  on  the  Jersey  shore,  within  a  radius  of  ten  or 
twelve  miles  of  New  York,  operated  by  the  Public  Service  Cor- 
poration of  New  Jersey,  and  the  station  of  the  Hudson  and 
Manhattan  Railroad  Company. 

The  diagram  includes  only  that  portion  of  the  load  of  the 
electrified  steam  roads  which  has  already  been  electrified,  and 
does  not  include  an  estimate  of  the  load  of  the  isolated  plants. 
If  the  remainder  of  the  load  of  the  electrified  steam  roads  and 
the  isolated-plant  load  were  included,  the  total  would  be  in 
the  neighborhood  of  1,000,000  kw.1 

Looking  ahead,  if  you  take  the  New  York  maximum  of 
676,000  kw.  and  apply  an  8  per  cent  annual  increase  (the  actual 
increase  of  this  maximum  over  the  previous  winter  was  7.5 
per  cent),  at  the  end  of  eight  years  the  New  York  maximum 
would  amount  to  1,250,000  kw.,  and  at  the  end  of  ten  years  to 
1,480,000  kw. 

If  there  be  added  to  these  figures  the  isolated-plant  and 
steam-railroad  demand,  it  makes  about  1,000,000  kw.  of  load 
at  the  present  time.  The  steam-railroad  demand  would  be 
about  170,000  kw.  of  that  total,  and  the  demand  made  by 
isolated  plants  would  be  217,000  kw. 

1.  In  this  paper  the  abbreviation  "kw."  is  used  for  "kilowatt"  or  "kilo- 
watts." 


260  ADDRESSES  OF  SAMUEL  INSULL 

The  total  load  of  the  systems  separately  is  678,000  kw.,  and 
there  is  a  diversity  factor  that  would  reduce  that  if  they  were 


NEW  YORK— TOTAL 

—  JAN.5  1912  DAY  OF  COMBINED  MAXIMUM  I 

—  MAXIMUM  AS  SEPARATE  SYSTEMS 

•at 

MAXIMUM    DIVERSITY  FACTOR 

LJOHT  AND  POWER  232,500     34,700    17.551    35.8jt| 

STREET  RAILWAYS  382,110       9,630     0.6       37.8 
6TEAM  ROADS  63,620      8,090     B.1       87.6 

TOTA4.8  678,230)  47  420 

TOTALS  630,810}      ' 


00,000 


300,000 


00,000 


Fig.l 

all  run  as  one  system;  that  is,  if  the  present  business  of  the 
lighting-and-power  companies,  the  street  railways  and  the 
steam  railroads  were  combined,  the  maximum  load  this  last 


RAILROAD  ELECTRIFICATION  261 

winter  would  have  amounted  to  630,000  kw.,  or  a  saving  of  up- 
wards of  47,000  kw.  The  diversity  factor  amounted  to  7.5 
per  cent,  and  the  load  factor  would  have  been  improved  from 


=TT 1170,000 


150,000 


NEW  YORK 
LIGHT  AND   POWER 


JAN. 5, 1912  DAY  OF  COMBINED  MAXIMUM 

MAXIMUM  AS  SEPARATE  SYSTEMS 


ANNUAL 
LOAD 

MAXIMUM  DIVERSITY  FACTOR 
NEW  YORK  EDISON  168,000  25,000  17.5£  82.4JI 
PUBLIC  SERVICE  29,000  3,800  15.2  38.8 

BROOKLYN  EDISON       85,500       B. 900  19.9       35.8 
TOTAL  282,500     84,700     17.5JC    33.  8< 


12      2       4       6        8       10      12       2       I       6        8       10      12 


Fig.  2 

36.9  to  40  per  cent.     Later,  I  will  explain  some  of  the  advan- 
tages obtained  from  that. 

Fig.  2  is  the  New  York  light-and-power  load  diagram.  The 
New  York  Edison  Company  curve  includes  the  load  of  the 
United  Electric  Light  and  Power  Company  and  also  the  Bronx 
load.  The  Public  Service  Corporation  curve  includes  that 


262  ADDRESSES  OF  SAMUEL  INSULL 

company's  light-and-power  load  only,  its  street-railway  load 
being  on  the  street-railway  curve. 

The  total  load  is  232,500  kw.     The  load  factor  of  the  various 


190,000 


170.000 


NEW  YORK — STREET  RYS. 

JAN.5,  1912  DAY  OF  COMBINED  MAXIMU 

MAXIMUM  AS  SEPARATE  SYSTEMS^ 

DIVERSITY 


10,000 


systems  by  themselves  is  33.8  per  cent.  There  is  a  diversity 
of  17.5  per  cent,  amounting  to  34,700  kw.,  between  the  sum  of 
the  maxima  for  the  year  of  these  different  lighting  companies 
and  their  load  between  5:45  and  6  p.m.  on  January  5,  1912, 


RAILROAD  ELECTRIFICATION  263 

which  was  the  time  of  the  maximum  for  all  the  New  York 
companies  combined;  that  is,  the  lighting,  the  street-railway 
and  the  electrified  steam-railroad  companies. 

Fig.  3  shows  the  load  diagram  of  the  street  railways  of  New 


82,000 


NEW  YORK-STEAM  R.R. 

JAN.  5,  1812  DAY  OF  COMBINED  MAXIMUM 
MAXIMUM  AS  SEPARATE  SYSTEMS 

ANNUAL 
IMUM   DIVERSITY    LOADF 


PENNSYLVANIA  80,000  1,600       6.6  <       39. 

NEW  YORK  CENTRAL  24,200      600       2.6         35.6 
NEW  HAVEN 
TOTALS 


12       24        6        8101224        6 


Fig.  4 

York  city.  The  Interborough  has  much  the  largest  maximum 
of  any  of  the  New  York  companies,  and  therefore  establishes 
the  day  and  hour  of  the  combined  maximum,  and  there  is  no 
diversity  between  the  Interborough  load  and  the  combined 
maximum.  The  diversity  between  the  three  power  houses, 


264  ADDRESSES  OF  SAMUEL  INSULL 

subway,  surface  and  elevated,  of  the  Interborough  has  not 
been  taken  advantage  of,  and  possibly  amounts  to  a  consider- 
able figure.  What  is  meant  by  that  is  that  I  have  not  taken 
advantage  of  it  in  making  these  diagrams,  because  the  interests 
having  charge  of  the  street  railways,  I  believe,  have  already 
taken  advantage  of  it  by  connecting  up  then*  various  power 
houses,  so  as  to  get  the  advantage  of  the  diversity  factor. 

Fig.  4  shows  the  load  diagram  of  the  steam  railroads  enter- 
ing New  York  city.  Due  to  the  electric  heating  of  the  subur- 
ban cars,  the  New  York  Central  maximum  occurs  on  the  same 
day  as  the  Interborough  and  the  combined  maximum,  and  the 
Pennsylvania  maximum,  for  the  same  reason,  only  a  few  days 
later. 

The  present  electrical  load  for  the  passenger  service  of  the 
steam  railroads  of  New  York  is  estimated  at  about  two-thirds 
of  the  total  load  if  all  of  the  passenger  service  within  a  reasonable 
radius  of,  say,  fifteen  to  twenty  miles  of  New  York  city  were 
electrified.  This  would  give  for  New  York  a  total  electrified 
passenger  load  of  95,000  kw.,  as  compared  with  our  estimate 
for  Chicago  of  73,000  kw.,  which  appears  reasonable.  If  to 
this  we  add  75,000  kw.  for  freight,  as  compared  with  our  esti- 
mate for  Chicago  freight  of  78,000  kw.,  we  get  a  total  for 
the  electrified  steam  railroads  in  the  vicinity  of  New  York  of 
170,000  kw. 

Attention  might  be  called  to  the  fact  that  the  farther  out  the 
steam  railroads  are  electrified,  the  less  influence  the  suburban 
service  will  have,  and  therefore  the  greater  the  diversity  factor. 

There  is  a  very  important  point  I  wish  to  emphasize,  that 
has  a  bearing  on  this  subject  only  in  the  large  centers  of  popula- 
tion where  there  is  heavy  suburban  travel.  The  same  thing 
will  be  shown  in  some  of  the  curves  to  follow.  These  two 
maximum  loads,  morning  and  evening  (Fig.  4),  are  made  up 
of  suburban  business,  and  the  suburban-railroad  load  maxima 
are  largely  affected  by  the  heating  proposition,  and  also  the 
large  amount  of  power  needed  additionally  for  traction  in  cold 
weather.  That  condition  cannot  possibly  exist  except  in  a 
few,  perhaps  a  dozen,  cities  of  the  United  States.  The  steam- 


RAILROAD  ELECTRIFICATION 


265 


railroad  load  factor  is  relatively  poor  in  those  centers,  but  if 
you  will  take  the  average  business  throughout  the  country 
where  our  central  stations  are  in  cities,  say,  of  the  second  and 


120,000 


BOSTON TOTAL 

JAN.5,  1912  DAY  OF  COMBINED  MAXIMUM 
MAXIMUM  AS  SEPARATE  SYSTEMS 


ANNUAL 

LOAD 

DIVERSITY        FACTOR 
LIGHT  4  POWER  62,800        14,800     89.0jf      32.7J 

STREET  RAILWAYS      68.400  POO        1.6          87.8 

15,700     16.50    '  86-* 


10      12       2       4        6        8       10      12 


Fig.  5 

third  grade,  the  steam-railroad  load  would  show  a  very  much 
better  load  factor,  as  there  is  practically  little  or  no  suburban 
business  in  any  cities  except  the  very  largest  cities  of  the  country. 


266  ADDRESSES  OF  SAMUEL  INSULL 

THE  BOSTON  SITUATION 

Fig.  5  is  the  total- load  diagram  of  Boston.  The  street- 
railway  curve  is  the  Boston  Elevated  Railway  Company  load, 
which  includes  the  subway,  surface  and  elevated  roads.  The 
Edison  light-and-power  load  is  also  given. 

A  careful  estimate  of  the  electrical  requirements,  for  the  pas- 
senger service  only,  of  all  the  steam  roads  operating  within  the 
metropolitan  district  of  Boston,  has  been  made,  but  as  the 
figures  do  not  include  freight,  and  also  for  the  reason  that  the 
larger  portion  of  it  is  based  on  11, 000- volt  single-phase  operation, 
which  system  practically  eliminates  the  possibility  of  showing 
savings  in  transmission  and  substation  by  combining  with  the 
other  local  power  supply,  I  have  not  attempted  to  include  load 
curves  for  the  electrified  steam  roads.  Also  no  estimate  has 
been  made  of  the  isolated-plant  load  in  Boston.  The  total 
rating  of  the  Boston  steam  plants,  160,600  kw.,  amounts  to 
a  reserve  on  the  combined  load  of  68  per  cent. 

It  will  easily  be  seen  that  there  is  a  remarkable  diversity 
between  the  loads  of  the  street-railway  and  lighting-and-power 
companies  in  Boston.  To  me  it  seems  almost  incredible  that 
there  should  be  built  a  second  large  power  station  in  Boston, 
when,  if  the  service  for  both  the  lighting  and  railway  were  run 
by  the  same  station,  the  maximum  load  last  winter  would  have 
been  95,400  kw.,  instead  of  111,200  kw.,  as  there  is  a  diversity 
of  16.5  per  cent  between  the  two  businesses;  and  yet  so  blind  are 
some  people  to  their  own  interests  that  the  financial  men 
running  the  Boston  elevated  roads  are  actually  throwing  money 
away  by  building  a  plant  for  themselves  right  by  the  side  of  the 
plant  of  the  Edison  Illuminating  Company  of  Boston. 

THE  CHICAGO  SITUATION 

Fig.  6  shows  the  total-load  diagram  for  Chicago.  The  diver- 
sity shown  in  the  tabulation  on  this  chart  amounts  to  72,260 
kw.,  and  would  require,  assuming  a  25  per  cent  reserve,  90,300 
kw.  more  capacity  if  operated  as  separate  systems  than  if  op- 


RAILROAD  ELECTRIFICATION 


267 


CHICAGO -TOTAL 


— JAN. 3  1912  DAY  OF  COMBINED  MAXIMUM 
—  MAXIMUM  AS  SEPARATE  SYSTEMS 


ANNUAL 

LOAD 
MAXIMUM      DIVERSITY    FACTOR 


LIGHT  4  POWER  100,640    12,670    14.4J   35  4rf 

STREET  RAILWAYS  186,920    13.390      8.  t      406 

ISOLATED  PLANTS  194,300    24,300    14.4 

STEAM  R.R.  146,760    21 ,300     17.0       _ 

TOTALS  e28,510l72  260    13.0<|42.6* 

TOTALS  658  250  i72'260    13-0*l48.4<4 


10       12       2        i        6.      8      10      12 


Fig.  6 


268  ADDRESSES  OF  SAMUEL  INSULL 

crated  on  a  combined  generating  system.  At  $75  per  kw.  this 
amounts  to  an  extra  investment  of  $6,772,500. 

The  isolated-plant  load,  although  showing  a  maximum  50 
per  cent  greater  than  our  present  light-and-power  load,  I 
believe  has  been  estimated  conservatively  low.  A  canvass 
of  the  number  and  size  of  isolated  plants  was  made  by  the 
contract  department  of  the  Commonwealth  Edison  Company, 
and  several  checks  on  these  figures  were  available,  such  as 
"The  Engineers'  Directory,"  the  agents'  knowledge  of  the 
field  and  the  City  of  Chicago  Boiler  Inspectors'  records. 

In  estimating  this  isolated-plant  load,  the  separate  maxima 
of  the  plants  are  assumed  to  be  two-thirds  of  the  rated  capacity, 
and  the  load  factor,  that  is,  the  ratio  of  the  average  kilowatts 
for  the  year  to  the  maximum  kilowatts,  is  assumed  to  be  25 
per  cent,  the  assumption  being  based  on  the  fact  that  the  actual 
load  factor  of  customers  on  our  wholesale  schedule,  representing 
a  very  large  amount  of  business,  is  26  per  cent. 

On  account  of  the  diversity  between  the  different  isolated 
plants,  it  is  assumed  that  their  load  factor,  if  combined,  would 
be  equal  to  the  load  factor  of  the  Commonwealth  Edison  Com- 
pany's general  light  and  power  business;  that  is,  35.5  per  cent. 

To  the  maximum  kilowatts  and  kilowatt-hours  thus  obtained 
are  added  a  certain  portion  of  the  South  Chicago  Steel  Works 
load,  the  refrigeration  load,  assuming  that  one-half  the  ice  of 
Chicago  is  produced  electrically,  and  the  electric-vehicle  load, 
assuming  two -thirds  of  all  horses  replaced  by  electric  vehicles. 
These  latter  two  items,  being  off-peak  loads,  improve  the  load 
factor  up  to  the  figure  shown,  although  they  represent  only 
17  per  cent  of  the  total  estimated  kilowatt-hours  of  the  isolated 
plants. 

The  increased  investment  necessary  as  between  these  sys- 
tems being  operated  all  as  one,  including  steam  railroads,  and 
being  operated  as  separate  systems,  taking  the  cost  of  generating 
plant  plus  the  cost  of  the  primary  transmission  system,  would 
mean  an  expenditure  of  upwards  of  $10,000,000  to  $12,000,000 
more  than  if  the  work  is  done  on  one  system.  We  have  got 
reasonably  well  started  in  Chicago  towards  doing  it  on  one 


RAILROAD  ELECTRIFICATION  269 

system.  We  have  practically  the  most  important  part  of  the 
work,  that  is,  the  street-railway  work,  and  we  are  trying  there 
to  do  all  we  can  to  get  the  isolated  plants  out  of  existence. 
In  the  steam-railroad  business,  as  may  be  seen  from  our  esti- 
mates, in  what  is  the  greatest  railroad  center  in  the  United 
States  today,  passenger,  freight  and  transfer  business  combined, 
the  amount  of  energy  required  for  operating  all  of  the  terminal 
systems  there  is  so  small  a  percentage  of  the  whole  that  it 
would  seem  unreasonable  to  think  we  will  not  be  able  to  get 
that,  as  well  as  the  business  of  the  surface  and  elevated  railroads. 

The  next  diagram,  Fig.  7,  shows  the  load  curve  of  the  street 
railways  of  the  city  of  Chicago.  One  interesting  feature  of  this 
chart  is  that  the  highest  maximum  for  two  of  the  street-railway 
companies  occurred  in  the  morning  of  February  21,  soon  after 
the  beginning  of  a  very  heavy  snow  storm,  with  a  strong  cold 
wind  blowing  and  the  temperature  a  little  above  20  deg.  Fahr. 
That  chart  is  generally  characteristic  of  the  urban  transporta- 
tion business  of  a  city  of  the  size  of  Chicago. 

Fig.  8  shows  the  load  diagram  of  the  electrified  steam  rail- 
roads of  Chicago,  assuming  that  the  steam  railroads  in  the 
vicinity  of  Chicago  are  electrified  some  time.  It  is  a  load 
diagram  of  the  maximum  for  the  year.  The  method  of  estimat- 
ing all  of  the  data  regarding  the  load  of  the  electrified  steam 
roads  of  Chicago  is  given  in  detail  in  the  appendix  to  this  paper, 
on  "Electric  Power  Requirements  of  Chicago  Steam  Railroads 
Electrified  —  1911-1912,"  prepared  by  Messrs.  Bird,  Gear  and 
Fowler. 

The  freight  curve,  you  will  see,  has  an  extremely  good  load 
factor.  The  passenger  business  is  governed  by  exactly  the 
same  conditions,  only  intensified,  that  govern  the  passenger 
business  in  New  York  city.  I  presume  the  curves  of  passenger 
business  in  New  York,  Chicago,  Boston  and  Philadelphia  would 
probably  be  all  about  the  same,  except  that  Philadelphia, 
Boston  and  New  York  ought  to  have  some  advantage  from  a 
much  larger  amount  of  pleasure  business  in  the  summer  than  we 
get  in  Chicago. 

The  extreme  peak  in  the  morning  and  evening  is  caused  by 


270  ADDRESSES  OF  SAMUEL  INSULL 

the  suburban  business,  the  extra  amount  of  energy  necessary 
at  the  time  of  extreme  cold  for  traction  purposes  and  the  extra 
amount  of  energy  necessary  for  heating  purposes.  If  it  were 
not  for  these  two  peaks,  the  load  factor  would  even  up  better 
than  it  does,  and  yet,  notwithstanding  these  peaks,  the  com- 


80,000 


CHICAGO  STREET  RAILWAYS       V. 

JAN.  3,  1912  DAY  OF  COMBINED  MAXIMUM 
MAXIMUM  AS  SEPARATE  SYSTEMS 

ANNUAL 

MAXIMUM      DIVERSITY       LOAD  FACTOR 
48,6304,100         9.1*         40.9* 
81,120    8,490       11.7         41.2 


CITY  RY8. 
/          ]  CHICAGO  HY8. 

ELEVATED    RY8.  55.970  1,4OO         2.6 
TOTALS     189,920   18,990      8. 1  < 


Fig.  7 

bined  freight  and  passenger  business  is  estimated  to  have  46 
per  cent  load  factor.  Now  if  we  consider  the  steam-railroad 
business,  say  in  cities  of  the  size  of  Cleveland,  Detroit,  Buffalo, 
and  possibly  Rochester,  Toledo,  and  similar  cities,  their  load 
factors  would  be  uniformly  better  than  is  shown  in  Fig.  8.  In 


RAILROAD  ELECTRIFICATION 


271 


my  judgment  the  date  of  the  maximum  load,  and  the  time  of 
day  of  the  maximum  load,  would  probably  change  consider- 
ably, to  the  advantage  of  the  local  power  company  supplying 
the  energy. 

I  thought  it  might  be  of  interest  to  include  a  chart  of  the 
annual  load  factors  of  the  Commonwealth  Edison  Company 


150,000 


CHICAGO -STEAM   R.R. 
REQUIREMENTSIF  ELECTRIFIED 
MAXIMUM  FOR  YEAR-DECEMBER 


A.M. 


Fig.  8 


for  the  last  twelve  years,  as  shown  in  Fig.  9.  You  will  notice 
that  the  street-railway  load  factor  went  up  and  then  dropped. 
It  was  at  its  highest  for  a  few  years  just  before  one  of  the  large 
street  railways  shut  down  its  obsolete  stations,  which  it  had 
operated  as  "  peak  plants"  only.  This  shutting  down  had  also 
the  result  of  earning  it  a  very  low  price  for  the  energy  it  pur- 
chased. The  tendency  of  the  railway  load  factor  is  to  run 


272 


ADDRESSES  OF  SAMUEL  INSULL 


even.  The  tendency  of  the  light-and-power  load  factor  is  to 
run  up.  The  combined  load  factor,  as  shown  in  Fig.  9,  is 
about  42.5.  The  light-and-power  business  by  itself  has  a  load 
factor  a  little  under  35,  and  the  street-railway  business  by  itself 
about  43  per  cent. 

TAKING  ADVANTAGE  OF  THE  DIVERSITY  FACTOR 

Consider  the  diversity  in  a  block  of  apartments.     This 
diagram1  has  been  used  a  number  of  times,  both  by  myself  and 


025 


ANNUAL  LOAD 
FACTORS. 

COMMONWEALTH  EDISON  COMPANY 


1900    19WT1902    1903~1904  1905     1906    1907    1908    1909^1910    1911   1912 
YEARS  ENDING  JUNE  aoth 

Fig.  9 

by  some  of  my  subordinates  in  writing  papers  on  different  sub- 
jects where  the  question  of  diversity  and  load  factor  comes  in, 
for  it  is  a  striking  illustration  of  diversity.  The  drawing 
shows  a  city  block  composed  of  average  apartments,  much  alike. 
Here  are  nearly  200  customers,  all  living  in  similar  apartments, 
all  of  about  the  same  class,  all  with  about  the  same  habits  of 
life,  and  yet  the  difference  in  the  load  factor,  taking  each  cus- 
tomer by  himself,  as  compared  with  all  of  them  put  together, 

1.  In  this  collected  edition  of  Mr.  Insull's  addresses  this  drawing  is  given 
as  Fig.  1  of  the  address  on  "Centralization  of  Energy  Supply,"  page  448. 


RAILROAD  ELECTRIFICATION  273 

is  such  that  you  get  almost  four  times  as  good  a  load  factor, 
and  that  is  owing  to  the  diversity  of  demand.  That  is  the 
fundamental  basis  of  the  profit-making  of  an  energy-selling 
company.  We  get  that  average  in  dealing  with  small  customers 
and  consequently  we  can  sell  these  small  customers  at  a  profit 
as  a  whole,  whereas  any  engineer  who  knew  the  facts  could 
demonstrate  to  me  that  each  one  by  himself  is  a  loss  to  us. 

It  is  exactly  that  same  principle  —  I  am  getting  down  to 
the  fundamentals,  the  A  B  C  of  energy  production  and  distri- 
bution —  that  I  and  others  who  advocate  the  same  ideas  want 
to  see  brought  about  in  all  the  electric-supply  business,  whether 
it  is  in  large  communities  or  small  communities.  I  want  to  see 
somebody  get  the  advantage  of  the  diversity  factor  that  exists. 
In  one  case,  with  small  customers,  it  may  show  400  per  cent 
advantage.  In  another  case,  in  a  large  community  like  the 
city  of  New  York  and  surrounding  territory,  that  percentage 
may  be  only  ten  per  cent.  But  it  runs  up  into  millions  of 
dollars,  which  is  being  thrown  away  today.  I  do  not  want 
to  see  those  who  are  right  on  the  threshold  of  entering  into  our 
line  of  business,  the  use  of  electrical  energy,  make  mistakes 
owing  to  their  ignorance  of  the  real  situation.  I  do  not  want 
to  see  them  make  the  mistake  that,  in  my  judgment,  largely 
through  force  of  circumstances,  the  New  York  Central  Company 
has  made  in  building  its  present  power  house,  and  the  Pennsyl- 
vania Railroad  Company  has  made  in  building  its  power  house, 
probably,  I  think,  as  much  because  they  could  not  find  people 
to  sell  them  energy  as  because  they  did  not  know  they  ought  to 
buy  energy  instead  of  manufacturing  it. 

DISTRIBUTION  AND  LOAD  FACTOR 

Fig.  10  is  a  map  of  New  York  city,  with  the  present  power- 
transmission  systems.  In  referring  to  New  York  city,  you 
will  notice  that  I  go  out  on  the  Hackensack  River  into  New 
Jersey,  as  I  consider  that  territory  properly  a  part  of  the  area 
included  in  the  greater  city  for  the  purposes  of  the  present  dis- 
cussion. 


274 


ADDRESSES  OF  SAMUEL  INSULL 


Fig.  11  shows  the  New  York  power-transmission  system 
unified  into  one  system.    You  will  notice  the  difference  be- 


NEW  YORK 

'RESENT  POWER 

TRANSMISSION 

SYSTEMS 


Q  Generating  Station 

•  Lighting  Sub-Station 

•  Railway  Sub-Station 
eJalnt  Sub-Station 


Fig.  10 

tween  the  two.  In  Fig.  10  the  number  of  substations  and  trans- 
mission lines  is  in  marked  contrast  to  the  effective  distribution 
in  Fig.  11. 

Fig.  12  shows  the  Chicago  daily  load  factor.     This  diagram 


RAILROAD  ELECTRIFICATION 


275 


shows  the  improvement  in  load  factor  as  it  affects  operating 
conditions,  the  improvement  being  due  mainly  to  the  railway 


JAMAICA 
\  BAY 

V  CO*.**) 


Generating  Station 
Lighting. Sub-Station 
Railway  Sub-Station 
Joint  Sub-Station 


Fig.  11 

load  coming  up  earlier  in  the  morning  and  the  depression  in  the 
light  and  power  load  at  the  time  of  the  evening  railway  peak. 
It  is  almost  impossible  to  figure  absolutely  and  closely  this 
saving  from  concentration  of  production  of  electrical  energy. 


276  ADDRESSES  OF  SAMUEL  INSTILL 

It  is  easy  enough  to  figure  the  saving  of  investment,  but  it  is 
pretty  hard  to  figure  the  saving  in  operating  expense.  It  is  a 
very  large  amount,  indeed,  and  the  items  especially  affected 
are  the  items  of  what  one  might  call  "readiness  to  serve," 


CHICAGO 

MONDAY  JULY  17,1911 
DAILY  LOAD  FACTORS 
LIGHT  &  POWER 
3  RAILWAYS 
RAILWAY 

EVATED  RAILWAY? 

RIFIEO  STEAM  ROADS 
D  AVERAGE 
B  ON  ONE 
TING  SYSTEM  /62.S 


12246810122        4        6        8       10     12 


Fig.  12 

including,  of  course,  the  expenses  incident  thereto.  I  do  not 
refer  to  fixed  charges  but  to  operating  expenses  outside  of  fixed 
charges.  Although  it  is  easy  to  figure  the  saving  in  fixed 
charges  due  to  diversity,  it  is  not  so  easy  to  figure  the  saving  due 
to  the  broadening  out  of  this  daily  curve,  but  it  goes  a  long 


RAILROAD  ELECTRIFICATION 


277 


|a| 

•*    0    CO    -* 

O    0 

Sc,^ 

O5    •* 

0     TJ. 

1  "o   ° 

SSS3S 

IS  § 

l?| 

!^S 

<     s 

<N    -4    « 

Tf    1C    O    t>-    00 

X 

S  -d  ™ 

X    CO 

1-1     ^- 

SM 

SSSSS 

St>. 
10 

2^| 

83 

ss 

JJN 

5  3  S  S3 

10    0 

I'!8 

S3 

^ 

IIs 

"*     X     ^H     CO     Tjl 

00    CO 

II8 

SO    •# 

SO    SC 

£|§ 

§S3^§ 

3S 

*Ja 

10    0 

10    10 

.  . 

0    -H    ®    CO    X 

t-    0 

G   -^ 

^ 

IN    CN 

<2  £  "* 

33SS3 

§3 

«l^ 

^g 

3    "r- 

1O    CO    1-1    X    CO 

X 

S    ^r* 

X    CO 

t~    CO 

SO    <N    O5    X    O 

»0     lO      T»(     TJ<     0 

£§ 

H-<" 

g? 

§g 

a'  Ji1  t» 

^    ^i    C0« 

IN    X 

fc  o 

g  ^r- 

0     -H 

10    •* 

jH- 

SSSS  JS 

£8 

H    S 

S  -> 

0    •# 

ss 

£  Is 

IN    CO    •*    lO    00 

IN 

1^ 

Ejs 

fr-    OJ 

<N    CO 

II2 

so  •*  ci  o  x 

CO    0 

1    ^ 

IIs 

0    X 

O    ^f 

38 

1O    IN    CO    1^ 

X    CO 

H    < 

c 

SO    tN 

10    <N 

1  °-~ 

3  S  S  S  15 

G 

l^2 

g§ 

feS 

II: 

3  3  3  S  3 

1O     -H 

II5 

CM    X 

SO   t^ 

-  d2 

^  05  US  •«  «0 

10  r^ 

-    d2 

IN    CO 

10    X 

2  5  •« 

(N    X    t-    -i    10 

SO    0 

2  2  -g 

§3 

ss 

"  fe 

fc 

-              ... 

:  S 

g 

a              '•  ^       '• 

+*            '.    o 

11 

1 

§      -^-5  ^ 

:  M 

r    « 

>  '-3 

1      1|S1 

11 

Ii 

^       x  a  °  ^ 

•o    S 

o  ii 

lilil! 

ted  average 
ined  on  one 

H  3 

ited  average 
ined  on  one 

S    O.  ^  ^    ^   *3 

ui  ^ 

2  S 

fl 

S         -^   ^*   a    S 

'«   | 

§  § 

o     PJ  C  S  S 

«  PQ 

?  u 

278 


ADDRESSES  OF  SAMUEL  INSULL 


way  towards  reducing  the  "readiness-to-serve"  charges  per  unit 
produced  in  a  given  time. 

In  Table  I   is  a  tabulation  of  the  daily  load   factors  in 
Chicago.    This  expresses  the  matter  a  little  differently.     The 


48,000 


BOSTON 

/IONDAY  JULY  17,1911 
DAILY  LOAD  FACTORS 
IGHT  AND  POWER  69.  5 


Fig.  13 

average  daily  or  operating  load  factors  for  the  different  sys- 
tems operating  separately,  55.6  per  cent,  is  equivalent  to  thir- 
teen and  one-half  hours  straight-line  or  steady  operation  per 
day.  The  load  factor  for  all  combined  on  one  generating  sys- 
tem, 59.9  per  cent,  is  equivalent  to  fourteen  and  one-half  hours 


RAILROAD  ELECTRIFICATION 


279 


hi 

CO 

!_, 

M 

•*          C5                0 

i-l          >O 

05 

IN 

s 

S 

8 

IN          t-                  •*          Q 

W          IO          O 

lO          1C          O 

S 

3 

S 

w 

>-5 

5 

s 

CO 

t>-            ^H                     00 

10       05            oo       05 

CO          lO          O 

i   z   § 

2 

S 

s 

1  |s 

s 

00 
00 

05 

O                  CO          CO 
•#        oo              10        r-i 

CO           IO           IH 

s    s    § 

<N 
g 

00 

g 

^ 

^ 

c  > 

CO 

rt 

CO          <N                  >0           •* 

10          >0          CO 

,_, 

<N 

11° 

5 

00 

OS 

oj        cq             co        t^- 

oo        oo        •* 

•&          it)          <O 

O5 

oo 

s 

£3* 

s 

s 

s 

00          ^H                  O          O 

10          00          M< 
•<*           10          O 

05 

oi 

C5 

d  ^ 

rt 

00 

00          O                 >0 

rt             00            US 

co 

00 

^M"1 

s 

s 

s 

S3        §     3 

§     ft     S 

£ 

3 

O 

1   £* 

« 

« 

CO 

t-                                CO- 

0!           00            •* 

2 

2 

H  ^ 

' 

10 

* 

CO       *           -1       ? 

•* 

US 

0 

d  >> 

05 

IN 

05 

w        t~             c^        cs 

00          10          CO 

O5 

0« 

„ 

33- 

CO 

!S 

C5 

pi          10                  00 

S     ft     S 

3 

s 

§ 

•C   §  o 

o 

10 

o 

10          CO                  O          IN 

T*                  0                  US 

CO 

CO 

t- 

*% 

05 

lO 

00    •       >O                 <N          <N 

00            O5     ^      T( 

5 

s 

§ 

*    a?  0 

3 

05 

S 

CO 
OS 

<N           OS                                O 
t>i           O                  O          «5 

00           »H           00 

o 

s 

s? 

. 

00 

<N 

00 

00           •*                                CO 

CO          «0 

10 

^ 

•* 

£3~ 

s 

§ 

!5 

S3         5     S 

ft     S     § 

* 

s 

s 

•d   i-' 

„, 

00 

„, 

O          f~ 

O          00          t~ 

^ 

00 

0 

^l2 

!* 

3 

3 

ft     S        S     S 

O          05          •* 

0 

C-) 

s 

CO 

s  §2 

i 

S 

S 

<N          O5                  OO 
0          •>*                  lO          >O 

g    s    s 

S 

s 

s 

| 

i     ':    1  j      j 

! 

• 

H 

B 

;                 3     ;        Ja 

•s       ; 

0 

New  York  Central  

New  York,  New  Haven  <! 

Pennsylvania  R.  R  

New  York  Edison  Co... 
BrooMyn  Edison  Co  

Public  Service  Co.  ( 
power)  

Public  Service  Co.  (Raib 

Brooklyn  Rapid  Transit 
Interborough  Rapid  Tra 
Third  Ave.  R.  R  

Hudson  &  Manhattan.  . 

Weighted  average  of  abo 

1 

280 


ADDRESSES  OF  SAMUEL  INSULL 


per  day,  or  an  increase  of  one  hour,  or  7.4  per  cent.  This  im- 
provement means  that  the  fixed-charge  and  "readiness-to-serve" 
portion  of  the  operating  expense  is  prorated  over  a  greater  num- 
ber of  units  of  output  per  day  and  per  year. 

You  will  notice,  as  shown  in  the  table,  the  improvement  in 


1 2 


10    12      2 


-i- 


LOAD  FACTOR 

COMMONWEALTH  CO.  JAN.  3, 1B12  55.7*, 

COMMONWEALTH  CO.  DEC. 18, 1902          42.  3£ 
NEW  YORK  EDISON  CO. DEC. 21, 1911        44.0g 


200,000 
180,000 
160,000 
140,000 
120,000 c 
100,OOOJ 
80,000 
60,000 
40,000 


Fig.  14.  Chicago  and  New  York.  — Load 
Diagrams  for  Maximum  Day  of  Year  Pro- 
rated to  Chicago  1912  Maximum  for  Com- 
parison. 

conditions  in  each  month  in  the  year.  The  average  shows  a 
decided  improvement  if  the  systems  are  combined  in  one.  The 
average  is  59.9  and  the  average  of  the  others,  separately,  is 
55.6  per  cent. 

Fig.  13  shows  a  diagram  of  the  Boston  daily  load,  and  Table 
II  is  a  tabulation  of  Boston  daily  load  factors.  It  is  shown 
that  there  would  be  quite  an  improvement  if  the  Boston  Ele- 
vated and  the  Boston  Edison  loads  were  operated  together.  The 


RAILROAD  ELECTRIFICATION  281 

average  is  53.9  per  cent  operated  separately  and  59.4  per  cent 
if  operated  as  one  system. 

Table  III  gives  a  tabulation  of  the  New  York  daily  load 
factors.  It  gives  the  same  general  character  of  information. 
Operated  separately  the  stations  show  51  per  cent,  and  oper- 
ated together  56.2  per  cent. 

Fig.  14  is  a  comparison  of  the  Chicago  and  New  York  load 
diagrams.  In  this  diagram  the  different  load  diagrams  shown 
have  all  been  prorated  so  that  the  maxima  of  all  are  equal  and 
the  same  as  that  for  Chicago  for  January  3,  1912.  This 
method  of  comparing  load  diagrams  shows  just  what  hours  of 
the  day  are  affected  by  the  improvement  in  load  factor,  and 
brings  out  perhaps  more  clearly  than  any  other  method  the 
great  advantage  from  an  operating  point  of  view  of  the  com- 
bining on  one  generating  system  of  the  energy  supplied  for  dif- 
ferent purposes.  This  improvement,  for  instance,  for  Chicago 
as  compared  with  New  York,  has  a  very  decided  effect  upon 
the  operating  cost,  and  is  one  of  the  principal  reasons  for  the 
very  low  generating  cost  in  Chicago. 

The  effect  of  diversity  on  the  peak,  which  results  in  a  saving 
in  investment,  can  be  and  has  been  very  readily  figured.  But 
the  effect  of  this  diversity  in  reducing  the  operating  cost  cannot 
be  so  readily  calculated.  Nevertheless,  there  is  no  doubt  that 
the  saving  in  operating  expense  is  fully  as  important  as  the 
saving  in  investment. 

SOME  OF  THE  RESULTS  AND  POSSIBLE  RESULTS 

Fig.  14  was  prepared  to  show  exactly  the  result  of  the  policy 
the  Commonwealth  Edison  Company  has  pursued  in  Chicago 
for  the  last  ten  years.  It  was  just  about  ten  years  when  we 
commenced  to  sell  energy  at  prices  that  most  of  the  producers 
of  energy  in  this  country  thought  were  so  ridiculously  low  that 
it  was  only  a  question  of  time  and  the  size  of  our  pocket-book 
as  to  how  long  we  could  stand  it.  This  diagram  shows  you  the 
result  we  have  been  able  to  obtain.  As  a  contribution  to  our 
fixed  charges,  as  a  contribution  to  our  stand-by  charges,  as  a 


282  ADDRESSES  OF  SAMUEL  INSTILL 

means  of  producing  more  kilowatt-hours  in  a  given  period,  so 
as  to  provide  us  with  the  necessary  funds  to  adopt  a  reasonably 
bold  policy  of  selling  energy,  in  ten  years  we  have  been  able  to 
attain  this  result. 


300,000 


•  •  BOSTON  EDISON  COMPANY 

LOAD  FACTORS 

COMMONWEALTH  CO.  JAN.  8,1918  6B.7* 
COMMONWEALTH  CO.  DEC. 18, 1902  42.3'i 
BOSTON  EDISON  CO.  D EC.  22, 1 0 1 1  44. 3% 


Fig.  15.  Chicago  and  Boston.— Load  Dia- 
grams for  Maximum  Day  of  Year  Prorated 
to  Chicago  1912  Maximum  for  Comparison. 

Fig.  15  is  a  comparison  of  the  Chicago  and  Boston  load  dia- 
grams. 

Fig.  16  is  a  map  showing  the  Chicago  railroad  terminals  in 
the  proposed  electrical  zone,  the  boundary  of  which  was  laid 
out  by  the  Chicago  Association  of  Commerce.  The  zone  in- 
cludes a  territory  about  32  miles  long,  with  an  average  width  of 
ten  to  twelve  miles. 

Fig.  17  is  a  map  of  the  electrification  of  steam  railroads  in 
Chicago,  based  on  a  plan  of  group  operation;  that  is,  a  plan  of 


CHICAGO 

RAILROADS  TERMINALS 

IN  PROPOSED 
V  ELECTRICAL  ZONE 


Fig.  16 


CHICAGO 

ELECTRIFICATION 

OF 

STEAM  RAILROADS 
GROUP  OPERATION 

•     Generating  Station 


Fig.  17 


ELECTRIFICATION 
STEAM  RAILROADS 


Fig.  18 


286 


ADDRESSES  OF  SAMUEL  INSULL 


stations,  substations  and  primary  transmission  lines  on  the 
theory  that  the  railroads  of  the  various  financial  groups,  the 
New  York  Central  group,  the  Pennsylvania  group,  and  so  on, 
would  operate  their  power  jointly,  the  idea  being  that  the  New 
York  Central  would  have  a  system  for  itself,  the  Pennsylvania 


CHICAGO 
FREIGHT  AND  SWITCHING 
ELECTRICAL  REQUIREMENTS 
NOVEMBER 

7 

•  —  i 

au,ouo 
ro.ooo 

00,000 
50,000 
10,000 
30,000 
20,000 
10,000 

0 

J 

•^ 

/•  ~—  • 

^~^~ 

\ 

i 

^ 

/ 

\   \ 

/! 

^J 

NPs* 

& 

\\ 

^ 

7 

\ 

\ 

/ 

/ 

\ 

\ 

2 

/ 

\ 

\ 

/ 

/ 

\ 

/ 

\ 

^ 

7 

ou 

f 

\ 

r 

—  —  ^, 

\ 

' 

f 

J 

> 

N, 

\ 

^ 

; 

^ 

12      9        4        6        t 
A.M. 

10      12       2        ^ 
Fig.  19 

P.M. 

10     1 

would  have  a  system  for  itself,  and  so  on  all  the  way  down  the 
line. 

Fig.  18  shows  the  electrification  of  steam  railroads,  with  uni- 
fied power  supply,  in  the  city  of  Chicago.  That  is  what  it 
would  be  like  if  all  the  companies  obtained  their  power  from 
one  source,  and  shows  the  difference  between  purchased  power 
and  individual  production. 

Fig.  19  is  the  load  diagram  of  the  freight  electrical  require- 
ments of  the  steam  railroads  in  Chicago.  This  is  a  curve  we 


RAILROAD  ELECTRIFICATION  287 

have  had  worked  out  in  relation  to  freight  business,  and  it 
shows  some  rather  interesting  things.  This  freight  curve  has 
an  extremely  good  load  factor,  estimated  at  70  per  cent  daily 
and  60  per  cent  yearly.  Through  freights  come  in  during  the 
early  morning  hours  and  are  broken  up,  switched  and  transferred 
from  seven  o'clock  in  the  morning  on,  and  then  during  the  late 
afternoon  there  is  another  switching  and  transfer  peak  caused 


J 

80,000 

60,000 

E 

^  40  OOC 

JLV    AUG.     SEPT.     OCT.      NOV.      D 

8 

/ 

<c  10 

%*"***** 



2J 

ICREA8 
\ 

:DTRA 

;TION 

UETO 

COLO 

/ 

'  s* 

5 

—  '     — 

\     1 
^\ 

1( 

/"  • 

I      V 
)<     ! 

\N 

0*  15 

t\ 

^ 
> 

.  «r-~: 

^> 

1,500,000° 

a 

HI 

a. 
ft 

1,000,000  o 
O 

8500,000 

VA 

/ 

\ 

\ 

s/. 

^  ' 

^~~" 

^  ^; 



"7^ 

^ 

^~-  — 

—  - 

$2125 

$2800 

31:200 

92225 

$2115 

s 

* 

^ 

*^> 

$1600 

•^> 

$2000 

20000 

MONTHLY  GROSS  FREIGHT     ARNI 

REPRESENTATIVE  CHICAGO  ROADS 
SANTA  FE                GREAT  WESTERN     GRAND 
B.  4  O.                    MONON                       IX.L.  CE^ 
NORTHWESTERN  ST.  PAUL                    ROCK  IS 
BURLINGTON           ERIE                              WABASH 
YEAR  1910-1911 
YEAR  1909-1810 

NGS 

fRUNK 
TRAL 

LAND 

0 

FR 

-ELEC 
IGHT/ 

RICAL 

LL  not 

REQUH 
D8  -EL 

EMENT 
CTRIO 

ZONE 

Fig.  20 

by  the  making  up  of  the  through  freights  and  getting  them  ready 
to  go  out  as  soon  as  the  late-afternoon  passenger  peak  is  over. 
The  peak  on  the  in-and-out  freight  of  the  day  occurs  from 
seven  o'clock  in  the  evening  on,  due  to  these  outgoing  through 
freights  which  were  made  up  in  the  late  afternoon. 

Fig.  20  is  the  diagram  of  the  freight  earnings  and  monthly 
freight  electrical  requirements  of  the  roads  in  Chicago.  It 
shows  the  monthly  gross  freight  earnings  for  two  years  for  a 
group  of  Chicago  roads,  and  also  for  the  Elgin,  Joliet  &  Eastern, 
which  latter  ought  to  show  whether  local  Chicago  conditions 
vary  materially  from  the  curve  for  the  trunk  lines  included,  as 


288  ADDRESSES  OF  SAMUEL  INSULL 

it  has  been  impossible  to  get,  in  any  way,  the  figures  of  local 
earnings  of  the  different  trunk  railroads. 

It  has  been  assumed  that  normal  electrical  requirements  of 
freight  traffic  will  vary  for  the  different  months  of  the  year 
similarly  to  the  variation  shown  for  the  twelve  roads  for  1910 


CHICAGO 
PASSENGER 

UECTRICAL.  REQUIREMENTS 
DECEMBER 


P.M. 


Fig.  21 


and  1911  and  that  these  normal  requirements  will  be  increased 
during  the  winter  months  as  shown,  on  account  of  increased 
traction  or  increased  resistance  due  to  the  cold. 

Fig.  21  is  the  load  diagram  of  the  steam-railroad  passenger 
electrical  requirements  in  Chicago.  This  diagram  shows  these 
requirements  in  December.  It  has  the  same  general  charac- 
teristics as  the  New  York  curve,  with  the  high  peak  morning 


RAILROAD  ELECTRIFICATION  289 

and  evening,  owing  to  the  suburban  passenger  business  and 
owing  to  the  heating  of  the  cars. 

Fig.  22  shows  the  passenger  earnings  and  monthly  electrical 


JULY     AUG.      SEPT.     OCT. 


DEC.      JAN.       FEB. 


28,000 

l/'x 

"^^ 

N 

REASE 

D  TRACTION  D 

JETO 

OLD 

$ 

dq 

it 
» 

^~^ 

)^       2 

^ 

*L. 

^ 

^  —  ' 

9 

400,000 

$ 
200,000 

0 

'  ^s 

'^// 

"\s 

^ 

~ 

\ 

^ 

/ 

< 

\ 

^--^ 

KILOWATTS 

i 

a 

HI 

a. 

MONTHLY  GROSS    PASSENGER   EARNINGS 
REPRESENTATIVE  CHICAGO  ROADS 
SANTA  FE                 GREAT  WESTERN    GRAND  TRUNK 
B.   4  0.                      MONON                       ILL.  CENTRAL 

</) 

5 

NORTHWESTERN   ST.  PAUL                    ROCK  ISLAND 
BURLINGTON           ERIE                              WABASH 
—  —    YEAR  1910-1911 

2 

0 

(.  ELECTRICAL  REQU  REME    T8- 
THROUGH  PASSENGER  SERVICE- 
1                              1         ELECTRIC  ZONE-ASSUMING 
VARIATION  AT  ^  THAT  OF  EARNINGS;  OF  1  910  -1  91  1 

Fig.  22 

requirements  in  Chicago,  the  latter  being  based  on  an  assumed 
variation  one-half  that  of  the  earnings  for  1910-11.  This 
diagram  assumes,  for  through  passenger  business,  that  the 
cars  will  be  heated  by  steam,  and  you  will  notice  the  increased 
energy  which  is  required  for  traction  owing  to  the  cold. 


JLY   AUG.     SEPT.    OCT.      NOV.      DEC.      JAN.      FEB.  .   MAR.      APR.      MAY      JUNE    JU 

^000 
50,000 
40,000 

/ 

TOTAL 

\ 

A 

<s 

TOLL 

CTRIC 

TRACT 

ON  DU 

s 

A 

-20<!       2 

%&? 

"^"•^Ov    \ 

>'D$s-^sN. 

:0*i 

V 

NO 

3MAL 

>«£ 

-5*T 

Fig.    23.     Electrical    Requirements  for   Suburban   Rail- 
road Service  in  Proposed  Chicago  Electric  Zone 

Fig.  23  shows  the  proposed  steam-railroad  suburban  elec- 
trical requirements,  month  by  month,  in  Chicago.  In  addition 
to  the  normal  amount  of  energy  required,  there  is  the  increased 


290 


ADDRESSES  OF  SAMUEL  INSULL 


X 

K^ 

140,000 
120,000 
100,000^ 

80.000  | 
2 

60,000 

iO.OOO 
20,000 

/ 

X 

V 

£2- 

/ 

\ 

V* 

•^ 

X 

r 

X 

^ 

•-*. 

N. 

$2" 

* 

X 

s 

X 

\ 

\ 

X 

"^ 

IGER— 

JULY  AUQ.  SEPT.  OCT.  NOV.   DEC.  JAN.  FEB.  MAR.  APR.  MAY  JUNE  JULY 

Fig.  24.  Monthly  Variation  in  Maximum  Electrical 
Requirements  in  Proposed  Chicago  Electric  Zone  for 
Railroads 


Fig.  25.  Relation  of  Swing  Maximum  to  One-Hour  Maximum. — 
New  York,  New  Haven  and  Hartford  Railroad,  Cos  Cob 
Station,  July  17,  1911 


RAILROAD   ELECTRIFICATION  291 

requirement  for  traction  due  to  cold,  and  the  increase  due  to 
electric  heating. 

Fig.  24  shows  the  monthly  variation  in  the  total  electrical 
requirements  in  the  proposed  electrification  of  the  Chicago 
steam  railroads.  You  will  remember  that  the  load  factor  of 
the  through  passenger  business  is  extremely  good,  and  of  the 
freight  business  extremely  good.  That  would  indicate,  except 
in  the  ten  or  twelve  large  cities  to  which  I  have  referred,  that 
the  freight  and  passenger  business  ought  to  be  very  good 
throughout  the  country. 

Fig.  25  gives  a  comparison  between  the  swing  maximum  and 
the  one-hour  maximum  load  on  the  New  York,  New  Haven  & 
Hartford  Railroad  Company's  Cos  Cob  station.  This  diagram 
of  the  New  Haven  road  is  important  because  it  shows  that 
small  roads  installing  their  own  plants  must  provide  machinery 
sufficient  to  cover  the  maximum  swing,  which  frequently  lasts 
several  minutes,  and  which,  in  the  case  of  the  New  Haven  road, 
apparently  necessitates  a  reserve  amounting  to  74  per  cent. 

The  three-phase  rating  of  their  generators  is  21,000  kw.  and 
their  maximum  load  is  9,050  kw.,  which  is  a  reserve  of  132  per 
cent.  But  their  single-phase  operation  really  reduces  the  act- 
ual capacity  of  the  generators,  on  a  single-phase  basis,  to  15,000 
kw.,  which  is  equivalent  to  74  per  cent  reserve.  They  appar- 
ently have  no  greater  reserve  than  is  necessary,  because  they 
are  installing  three  6,000-kw.  three-phase  units  to  take  care  of 
additional  electrification. 

In  another  part  of  the  paper,  for  the  purpose  of  figuring  the 
rating  of  the  steam  plants  if  each  of  the  roads  installed  its 
own  plant,  instead  of  using  this  actual  74  per  cent  reserve,  we 
have  assumed  50  per  cent,  to  be  conservative,  as  compared 
with  25  per  cent  reserve  in  case  of  purchase  of  energy. 

The  point  brought  out  in  this  curve  is  also  important  from 
an  operating  point  of  view,  because,  with  a  system  of  central 
stations  for  all  energy  used  in  a  community,  the  entire  load 
factor  would  be  in  the  neighborhood  of  60  per  cent,  as  shown  in 
Table  I,  compared  with  25  per  cent  for  this  diagram  using  the 
maximum  swing. 


292  ADDRESSES  OF  SAMUEL  INSULL 

POSSIBLE  SAVING  BY  CONCENTRATION  OF  PRODUCTION  AND 
PRIMARY  DISTRIBUTION 

I  would  like  to  say  just  a  little,  before  I  conclude,  with  re- 
lation to  the  actual  saving  that,  in  my  judgment,  could  be 
obtained,  assuming  that  an  effort  were  made  to  bring  about 
the  concentration  of  production  and  the  concentration  of  pri- 
mary-distribution system  in  the  area  of  Greater  New  York; 
that  is,  an  area  including  the  Jersey  shore  a  little  beyond  the 
Hackensack  River.  The  total  saving  in  investment  that  could 
be  worked  out  over  a  period  of  relatively  few  years,  based  on 
the  experience  that  we  have  had  in  Chicago,  would  amount  to 
about  $18,000,000  to  $20,000,000.  That  is  in  investment  alone. 
The  saving  in  operating  expenses  would  amount  to  about 
$1,000,000  a  year.  Now,  figuring  fixed  charges  of  5  per  cent 
for  depreciation  and  5  per  cent  for  interest  on  the  saving  in  in- 
vestment, and  adding  to  that  the  saving  in  operating  expense, 
you  have  a  sum  almost  equal  to  $3,000,000.  That  sum,  cap- 
italized at  5  per  cent,  means  a  creation  of  $60,000,000  of 
value. 

At  the  rate  of  progress  now  going  on  in  the  neighborhood 
of  New  York  the  business  is  bound  to  double  inside  of  ten 
years.  If  the  present  scheme  is  followed  out  —  if  the  traction 
companies  have  their  own  separate  sources  of  supply;  if  the 
electric-light-and-power  companies  have  their  own  separate 
sources  of  supply;  if  the  steam  railroads  that  are  apparently  on 
the  threshold  of  electrification  have  their  own  sources  of 
supply  —  at  the  end  of  ten  years  the  waste  in  money  which 
will  have  taken  place,  on  a  5  per  cent  basis,  will  be  somewhere 
between  $140,000,000  and  $175,000,000.  The  direct  saving 
by  a  concentrated  system  of  generation  and  primary  distribu- 
tion, leaving  out  of  consideration  altogether  the  saving  in 
operating  expenses,  is  of  itself,  in  my  opinion,  sufficient  to  pro- 
vide the  necessary  funds  for  that  portion  of  steam-railroad 
electrification  centering  in  New  York.  That  is,  assuming  the 
steam-railroad  requirements  as  about  170,000  kw.  I  do  not 
believe  that  the  portion  of  combined  generating  stations  and 


RAILROAD  ELECTRIFICATION  293 

combined  primary  distribution  system  for  that  purpose  would 
cost  much  over  $100to$110a  kilowatt,  taking  it  on  the  basis 
of  a  combined  system. 

The  figures  which  my  engineers  have  prepared  indicate  that 
if  there  should  be  made  a  systematic  effort  at  massing  produc- 
tion and  massing  primary  distribution  in  the  area  referred  to, 
the  amount  of  property  that  would  be  realized  or  made  available 
for  increased  business  would  be  worth  $18,000,000,  or  there- 
about. I  do  not  think  that  the  energy  necessary  for  the  steam 
railroads  centering  in  New  York  and  the  primary  system  nec- 
essary to  take  that  energy  to  the  railroads  would  cost  over 
$18,000,000. 

Now  the  savings  are  here  at  your  feet.  The  engineering 
representatives  of  the  interests  that  have  these  various  public 
services  in  charge  are  most  of  them  members  of  the  Institute, 
and  they  can  check  up  the  figures.  I  will  not  attempt  to  bur- 
den the  Institute  records  with  the  details,  but  they  are  at  the 
disposal  of  anybody  who  wants  to  use  them.  I  am  speaking 
not  from  any  theoretical  point  of  view,  but  from  my  own  knowl- 
edge and  experience  in  developing  the  business  which  it  is  my 
pride  to  preside  over.  I  know  that  the  change  that  I  have  been 
able  to  work  there,  from  barely  earning  dividends  to  putting  the 
property  in  a  strong,  conservative  position,  has  been  the  result 
of  following  the  policy  that  I  have  laid  down  here,  and  I  urge 
the  people  who  are  interested  to  try  to  follow  it  out  around  New 
York.  It  is  a  policy  that  is  worthy  of  the  greatest  engineers 
and  worthy  of  the  thought  of  the  greatest  financiers  in  this 
country.  It  is  a  conservation  of  the  truest  order.  If  the  same 
policy  is  carried  out  throughout  the  United  States,  the  conser- 
vation of  fuel  will  be  something  tremendous  and  the  conser- 
vation of  labor  will  be  something  tremendous.  The  letting  loose 
of  capital  that  can  be  used  in  other  directions  will  stimulate 
business. 

There  is  no  greater  problem  in  the  industrial  world  today, 
no  problem  that  presents  greater  opportunities  for  the  engineers 
to  achieve  distinction,  no  problem  that  presents  greater  oppor- 
tunities for  the  financier  to  achieve  distinction  and  profit,  than 


294  ADDRESSES  OF  SAMUEL  INSULL 

the  proper  method  of  producing  energy  and  distributing  it  in 
a  given  area;  and  involved  in  that  question  is  the  solution  of 
the  providing  of  money  for  that  portion  of  the  electrification 
of  steam  railroads  that  ends  when  the  energy  is  put  into  the 
track. 

Before  concluding,  I  think  it  is  but  fair  to  my  own  staff  that 
I  should  say  that  it  would  have  been  impossible  for  me  to 
present  this  paper  if  it  had  not  been  for  the  loyal  and  valued 
assistance  rendered  me  for  three  months  in  preparing  data  for 
this  discussion,  under  the  direction  of  Mr.  Peter  Junkersfeld, 
of  the  Commonwealth  Edison  Company,  and  the  close  personal 
work  of  Mr.  Fowler,  our  chief  statistician;  Mr.  Gear,  our  en- 
gineer of  distribution,  and  Mr.  Bird,  one  of  the  engineers  of 
our  contract  department.  The  gentlemen  whom  I  have  men- 
tioned have  worked  so  hard  on  this  matter,  and  given  so  much 
of  their  time  to  it,  that  it  is  only  due  to  them  that  I  should  make 
this  statement. 


APPENDIX 

ELECTRIC  POWER  REQUIREMENTS  OF  CHICAGO  STEAM  RAIL- 
ROADS ELECTRIFIED— 1911-1912 

PREPABED    BY    PAUL   BIRD,    H.    B.    GEAR   AND    E.    J.    FOWLER 

ELECTRICAL  REQUIREMENTS  OF  FREIGHT  SERVICE  ON  ELECTRIFIED   STEAM 

RAILROADS  IN  CHICAGO  DISTRICT — COMPUTATIONS  MADE 

IN  MARCH,  1912 

The  electrical  requirements  of  the  freight  service  of  Chicago  have  been 
worked  out  for  the  same  zone  that  is  being  considered  by  the  Chicago  Associa- 
tion of  Commerce  Committee  on  Smoke  Abatement  and  Electrification  of 
Railway  Terminals. 

The  computations  cover  the  year  from  July,  1911,  to  June,  1912,  and  it  is 
assumed  that  the  steam  railroads  in  this  district  are  electrified  with  no  changes 
in  the  tracks  and  yards,  and  that  freight  is  handled  through  the  city  in  the  same 
manner  and  following  the  same  routes  as  it  does  today. 

When  the  railroads  are  actually  electrified  there  is  no  question  but  that 
great  changes  will  be  made  in  the  freight  terminals,  and  that  a  large  part  of  the 
freight  that  now  comes  through  the  heart  of  the  city  will  pass  around  and 
outside  the  city  limits  and  possibly  outside  the  electrified  zone. 

The  results  of  the  investigation  are: 


RAILROAD  ELECTRIFICATION 


295 


Month 


Maximum 
demand 


Kw-hr. 


Load  factor 
Per  cent 


July,  1911 

August 

September 

October 

November 

December 

January,  1912 

February 

March 

April 

May 

June 


55,200 


68,700 
71,200 
78,000 
74,200 


70,200 
70,000 
62,500 
60,400 
60,300 


28,814,400 
33,303,600 
34,624,800 
37,636.200 
39,312,000 
38,732,400 
35,600,400 
32,853,600 
36,540,000 
31,500,000 
31,528,800 
30,391,000 


70.3 

70^3 

70.2 

70 

70.3 

70.3 

69.7 

70.3 

70.1 

70.2 

70 


410,837,200 


The  maximum  demands  and  the  consumption  for  December,  the  month 
during  which  the  railway  maximum  demand  would  occur,  are  as  follows: 
DECEMBER  FREIGHT  REQUIREMENTS 

Maximum 

Railroads                                                                                        demand  Kw-hr. 

Wabash  R.  R 1611  840,900 

C.  I.  &  L.  R.  R.  (Monon) 736  384,200 

L.  S.  &  M.  S.  Ry 3244  1,693,400 

N.  Y.  C.  &  St.  L.  R.  R.  (Nickel  Plate) 1033  539,200 

P.  Ft.  W.  &  C.  Ry 3352  1,749,700 

B.  &  O.  R.  R 1713  894,200 

M.  C.  R.  R 2878  1,502,300 

ErieR.  R 1680  877,000 

P.  C.  C.  &  St.  L.  R.  R 2091  1.091,500 

Chicago  Great  Western  Ry.  .  .' 1124  586,700 

Northwestern  Ry 7605  3,969,800 

Rock  Island  Ry 2520  1,315,400 

C.  B.  &  Q.  R.  R 5098  2,661,200 

St.  Paul  R.  R 4127  2,154,300 

111.  Central  R.  R 4377  2,284,800 

Santa  Fe  R.  R 913  476.600 

C.  &  A.  Ry 1572  820,600 

C.  &  E.  I.  R.  R 3193  1,666,700 

Grand  Trunk  R.  R 1201  626,900 

Wise.  Central  (M.  S.  P.  &  S.  S.  M.) 1256  655,600 

C.  &  O.  of  Indiana 110  57,400 

Chicago  &  Indiana  Southern 148  77,300 

Pere  Marquette 368  192,100 

Chicago  &  Western  Indiana 967  504,800 

B.  &  O.— C.  T.  R.  R 2390  1,247,600 

C.  Junction  R.  R 4682  2,444,000 

E.  J.  &  E.  Ry.  (C.  L.  &  S.  E.  R.  R.) 3845  2,007,100 

Belt  Ry 7071  3,691,100 

Chicago,  West  Pullman  &  Southern  Ry 710  370,600 

111.  Northern 423  220,800 

Manufacturers  Junction 171  89,300 

Misc.  Belt  Roads 1991  1,039.300 

Total 74,200  38,732,400 

Methods  and  Data  Used  in  Making  Computations. — From  the  Chicago 
Association  of  Commerce  committee,  a  list  was  obtained  of  the  number  of  steam 
locomotives  used  within  the  Chicago  city  limits  in  October,  1911.  This  list, 
showing  the  number  of  locomotives  and  locomotive-hours  in  each  class  of  serv- 
ice,  was  as  follows:  Number  of  Working  hours 

Service                                                                                      locomotives  per  day 

Through  freight 361  812 

Switching 560  7223 

Transfer 182  2378 

Through  passenger 336  801 

Suburban  passenger 200  1000 


296 


ADDRESSES  OF  SAMUEL  INSULL 


An  estimate  was  made  of  the  coal  consumption  per  working  hour  of  each 
class  of  freight  locomotive,  and  from  the  coal  burned  in  the  city  limits  per  day 
the  necessary  electrical  requirements  for  the  same  service  were  computed. 

OCTOBER,  1911— CITY  LIMITS 


Through 
freight 

Switching 

Transfer 

Total 

Number  of  locomotives  

361 

560 

182 

1,103 

Number  of  working  hours  per  day  
*  Lb.  of  coal  per  locomotive  per  hour  .  . 

812 
2,000 

7,223 
600 

2,378 
1,350 

10,413 

Tons  of  coal  per  day  
Lb.  of  coal  per  hour  

812 
67,670 

2,196 
182,083 

1,602 
133,500 

4,610 
384,253 

*  Lb.  of  coal  per  hour  per  locomotive 

drawbar  horse-power  
*  Efficiency    (from    drawbar    to   power 

10 

12 

10 

Average  electrical  load  in  kw  

8,675 

19,072 

16,473 

44,220 

*  Watt-hours  per  ton-mile  

31 

120 

56 

6767000 

3  821  814 

7  036  610 

17  625  424 

pe        Y 

*  Assumption. 

The  pounds  of  coal  per  locomotive  per  working  hour  were  assumed  as 
shown  above  after  consulting  with  several  Chicago  railroad  men.  The  tons  of 
coal  per  day  obtained  in  this  way  check  very  closely  with  similar  figures  pub- 
lished in  the  1911  report  of  the  Chicago  Smoke  Department,  which  figures 
were  obtained  directly  from  the  railroad  companies. 

The  pounds  of  coal  per  hour  per  drawbar  horse-power  was  assumed  after 
discussing  the  subject  with  a  prominent  engineer  of  one  of  the  large  trunk-line 
railroads.  As  a  result  of  many  actual  tests  he  found  that  his  road  used  about 
eight  pounds  of  eastern  coal  per  drawbar  horse-power.  Correcting  this  figure 
for  the  difference  in  the  heat  value  of  the  coal,  the  above  figures  were  obtained 
for  Chicago. 

The  efficiency  of  60  per  cent  between  the  locomotive  drawbar  and  the 
electrical  power  house  was  also  chosen  after  discussing  the  matter  with  the 
same  engineer.  This  takes  into  account  the  losses  in  the  line,  the  transformers, 
and  in  the  motors  and  gears  of  the  electric  locomotive. 

The  "  watt-hour-per-ton-mile "  figures  are  in  accordance  with  results  ob- 
tained on  several  electrified  roads. 

Having  thus  obtained  the  average  power-house  load  in  kilowatts  for  the 
city  limits  and  the  month  of  October,  1911,  the  following  steps  were  taken: 

1.  The  average  load  of  44,220  kw.  was  apportioned  among  the  various 
railroads  operating  in  the  city. 

2.  The  results  were  increased,  so  as  to  apply  to  the  Chicago  Association  of 
Commerce  Electric  Zone  instead  of  the  city  limits. 

3.  A  study  was  made  of  the  movement  of  freight  cars  during  the  different 
hours  of  the  day,  and  the  different  months  of  the  year.     The  increased  traction 
on  account  of  cold  weather  was  also  considered.     The  daily,  monthly  and 
yearly  load  factors  were  thus  obtained. 

4.  The  maximum  demand  and  consumption  was  then  computed  for  each 
railroad  and  each  month  of  the  year. 

5.  The  results  were  checked  in  various  ways. 

Apportionment  of  Total  Average  Load  among  the  Railroads.— The  total 
average  load  was  found  to  be  44,220  kw.  for  October  and  within  the  city  limits. 
This  was  divided  amongst  the  different  railroads  in  accordance  with  the  coal 
consumed  by  their  freight  engines  as  given  in  the  Smoke  Department  report  of 


RAILROAD  ELECTRIFICATION 


297 


Increase  of  Figures  to  Cover  Association  of  Commerce  Electric  Zone. — A 
statement  of  the  track  mileage  of  all  railroads  for  the  city  limits  and  for  the 
zone,  was  obtained  from  the  Association  of  Commerce  committee.  With  this 
as  a  basis,  and  from  a  careful  study  of  the  map,  the  figures  of  average  electrical 
load  were  increased  to  cover  everything  within  the  zone.  The  average  increase 
in  load  was  22  per  cent. 

The  following  table  gives  the  average  load  in  kw.  for  October,  for  the  area 
within  the  city  limits  and  also  for  the  area  within  the  Electric  Zone. 

Load  Factors,  etc. — A  daily  load  factor  of  75  per  cent  was  assumed  for  the 
entire  freight  business  of  the  Chicago  district.  Mr.  L.  C.  Fritch  (now  chief 
engineer  of  the  Chicago  Great  Western  R.  R.)  investigated  the  subject  of 
electrification  of  the  Chicago  terminal  of  the  Illinois  Central  R.  R.  in  1909. 
He,  of  course,  had  access  to  all  the  records  of  the  railroad  and  his  load  curves 
for  the  freight  service  show  a  load  factor  of  75  per  cent.  The  subject  of  the 
movement  of  freight  cars  through  Chicago  was  also  discussed  with  several 
railroad  officials  connected  with  roads  which  are  among  the  largest  handlers  of 
freight  in  the  city,  and  from  the  information  thus  obtained,  it  seems  certain 
that  this  figure  is  about  right. 

Average  load  in  kilowatts,  October,  1911,  54,000. 

Maximum  kilowatts,  October,  1911  (75  per  cent  load  factor),  72,100. 


FREIGHT  SERVICE 
AVERAGE  LOAD  IN  KILOWATTS,  OCTOBER,  1911 


Railroad 

City 
limits 

Per  cent 
increase 

Electric 
Zone 

Maximum 
kilowatts 
75  per  cent 
load  factor 

Wabash  R.  R  

980 

20 

1180 

1570 

C.  I.  &  L.  R.  R  

460 

15 

530 

710 

L  S  &  M  S  Ry 

1890 

25 

2370 

3150 

N.  Y.  C.  &  St.  L.  R.  R  

620 

20 

760 

1010 

P.  Ft.  W.  &  C.  Ry  

1950 

25 

2403 

3250 

B.  &O.  R.  R  

830 

50 

1240 

1660 

M.  C.  R.  R  

1740 

20 

2080 

2790 

Erie  R  R 

1020 

20 

1220 

1630 

P.  C.  C.  &  St.  L.  R.  R  

1320 

15 

1520 

2030 

C.  Great  Western  Ry  

750 

10 

820 

1090 

Northwestern  Ry 

4430 

25 

5550 

7400 

Rock  Island  Ry  

1530 

20 

1840 

2450 

C.  B.  &  Q.  R.  R  

2970 

25 

3720 

4950 

St  Paul  R  R 

2500 

20 

3000 

4010 

111.  Central  R.  R  

2900 

10 

3180 

4250 

Santa  Fe  Ry 

580 

15 

670 

890 

C.  &  A.  Ry  

1000 

15 

1150 

1530 

C.  &E.I.R.  R  

1940 

20 

2330 

3100 

Grand  Trunk 

700 

25 

870 

1160 

Wise.  Central  

450 

100 

900 

1200 

C   &  O  of  Indiana 

80 

15 

90 

100 

Chicago  &  Ind.  Southern  
Pere  Marquette 

100 
230 

15 
15 

110 

260 

140 
350 

Chi.  &  Western  Ind  
B.  &  O.—  C.  T.  R.  R  

640 
900 

10 
100 

700 
1800 

930 
2350 

C.  Junction  

3400 

0 

3400 

4550 

E.  J.  &E.  Ry  
Belt  Ry  

1400 
4900 

100 
5 

2800 
5140 

3730 
6870 

Ch.  W.  Pullman  &  Southern  

500 

10 

550 

700 

111.  Northern  

300 

10 

330 

420 

Mfg.  Junction  
Misc.  Belt  Roads  

100 
1100 

25 
25 

120 
1380 

160 
1940 

Total  

44,220 

54,000 

72,100 

298 


ADDRESSES  OF  SAMUEL  INSULL 


In  order  to  get  at  the  variation  in  the  freight  business  throughout  the  year, 
the  freight  earnings  of  several  of  the  principal  railroads  were  plotted  as  shown 
in  Fig.  20.  The  ratios  obtained  in  this  manner  were  used  in  getting  the  max- 
imum kilowatts  for  each  month  of  the  year. 

It  was  then  decided  to  add  to  the  maximum  kilowatts  of  the  winter  months, 
the  following  percentages  to  take  care  of  increased  traction  due  to  cold. 


Month 
November  , 
December . , 
January  . . . 
February  . 

March 

April 


Per  cent  added 

on  account  of  cold 

10 

20 

20 

20 

15 

5 


In  getting  at  the  monthly  kilowatt-hours,  the  Sunday  requirements  were 
assumed  to  be  one-half  of  week-day  requirements  and  four  Sundays  were 
used  per  month. 

The  following  table  shows  the  maximum  kilowatt,  the  kilowatt-hour,  and 
load  factors  for  each  month  in  the  year. 


FREIGHT  ELECTRICAL  REQUIREMENTS— CHICAGO 


Per  cent 

Maximum  kilowatts 

Load 

of  aver- 
age daily 
earnings 

Normal 
require- 

Additional 
on  account  of  cold 

Total 

Kw-hr. 

factors 

Per 

October 

ments 

Per  cent 

Amount 

cent 

July,  1911.... 

76.5 

55,200 

55,200 

28,814,400 

70.3 

August  

88.5 

63,800 

63,800 

33,303,600 

69.6 

September.  .  .  . 

95.3 

68,700 

68,700 

34,624,800 

70.3 

October  

100 

72,100 

72,100 

37,636,200 

70.2 

November.  .  .  . 

98.4 

70,900 

16 

7ii6o 

78,000 

39,312,000 

70 

December  .... 

85.7 

61,800 

20 

12,400 

74,200 

38,732,400 

70.3 

January,  1912 

78.9 

56,800 

20 

11,400 

68,200 

35,600,400 

70.3 

February  

81.1 

58,500 

20 

11,700 

70,200 

32,853,600 

69.7 

March  

84.4 

60,900 

15 

9,100 

70,000 

36,540,000 

70.3 

April  

81.3 

58,600 

5 

3,900 

62,500 

31,500,000 

70.1 

May 

83  8 

60  400 

60  400 

31  528  800 

70  2 

June  

83.6 

60,300 

60,300 

30,391,000 

70  ' 

410,837,200 

Average  monthly  load  factor 70 . 1 

Annual  load  factor 60 . 1 

Normal  maximum  kilowatts  assumed  proportional  to  earnings. 

Load  factor  for  week  day  assumed  at  75  per  cent. 

Sunday  requirements  %  of  week  day,  assuming  four  Sundays  to  month 

Ratio  of  Passenger  to  Freight  Loads. — 

Total  kw.  hr.  per  year,  passenger 183,452,500  or    31  per  cent 

Total  kw.  hr.  per  year,  freight 410,837.200  or    69  per  cent 

Total  kw.  hr.  per  year,  passenger  and  freight 594,289,700  or  100  per  cent 

The  1911  report  of  the  Chicago  Smoke  Department  gives  the  average  daily 
coal  used  by  railroad  locomotives  in  city  limits  as  follows: 

Tons  of  coal  per  day,  passenger 1163  or    21  per  cent 

Tons  of  coal  per  day,  freight 4438  or    79  per  cent 

Tons  of  coal  per  day,  passenger  and  freight 5601  or  100  per  cent 


RAILROAD  ELECTRIFICATION  299 

This  is  a  good  check  on  the  computations  of  the  electrical  energy  required 
as  to  the  proportion  between  passenger  service  and  freight  service,  for  it  is  to  be 
expected  that  locomotives  engaged  in  freight  service  operate  less  efficiently 
than  passenger  locomotives. 

Saving  of  Coal  due  to  Electric  Traction. — The  total  electrical  energy  per  year 
required  by  the  electrified  steam  railroads  of  Chicago  is: 

Passenger  service 183,452,500  kw-hr. 

Freight 410,837,200  kw-hr. 


Total 594,289,700  kw-hr. 

At  three  Ib.  of  coal  per  kw-hr.  the  total  coal  per  year  in  the  power  houses 
would  be  891,000  tons. 

The  1911  report  of  the  Chicago  Smoke  Department  shows  that  the  railroads 
burn  in  their  steam  locomotives  about  1,850,000  tons  of  coal  per  year  in  the  city 
limits.  Increasing  this  figure  by  22  per  cent,  it  is  seen  that  the  railroads  burn 
about  2,260,000  tons  of  coal  per  year  in  the  electric  zone.  The  ratio  of  the  coal 
burned  with  electric  operation  to  the  coal  burned  with  steam  locomotives  is 
1  to  2. 55. 

Mr.  W.  S.  Murray,  electrical  engineer  [1912]  of  the  New  York,  New  Haven 
&  Hartford  R.  R.,  in  a  paper  presented  at  the  1911  convention  of  the  A.  I.  E.  E. 
said:  "It  has  been  demonstrated  that  the  ratio  between  the  coal  burned  for 
operating  passenger  trains  by  electric  rather  than  by  steam  locomotives  is  1 
to  2.  In  the  case  of  switching  engines,  this  rate  is  much  greater,  a  figure  of 
1  to  3  being  conservative." 

Tonnage  of  Freight  Handled  in  Chicago. — It  is  surprising  to  find  how  little 
information  there  is  available  on  this  subject.  The  railroads  do  not  keep  their 
records  so  that  the  tons  or  carloads  of  freight  handled  in  the  Chicago  district 
may  be  obtained.  Apparently  the  only  record  of  any  sort  that  was  ever  kept 
of  the  freight  movements  was  in  1902  and  1903  when  a  committee  of  Chicago 
railroad  officials  made  a  report  on  the  interchange  of  freight  between  the  dif- 
ferent roads.  This  report  was  made  with  particular  reference  to  the  clearing 
yards  of  the  Chicago  Union  Transfer  Company.  A  copy  of  this  report  was 
borrowed  from  Mr.  L.  C.  Fritch,  and  by  means  of  it  an  estimate  was  made  of 
the  tonnage  handled  by  the  eighteen  principal  roads  operating  in  Chicago.  The 
figures  given  in  this  report  cover  the  number  of  loaded  and  empty  cars  handled 
during  the  year  ended  June  30,  1903.  To  get  at  the  tons  of  freight  handled  in 
the  year  ending  June  30,  1912,  the  following  assumptions  were  made: 

Weight  of  empty  freight  car 18  tons 

Weight  of  loaded  freight  car 40  tona 

Days  per  year 330 

Increase  of  freight  business  from  1903  to  1912 67  per  cent 

The  last  figure  was  obtained  by  plotting  a  curve  of  the  total  ton-mileage  of 
freight  handled  per  year  in  the  United  States  from  1902  to  1910.  This  informa- 
tion was  obtained  from  Mr.  Slason  Thompson's  bureau  of  railway  statistics. 
From  the  data  given  in  the  1903  report  it  was  also  possible  to  approximate^  the 
number  of  switching  movements,  transfer  movements  and  "in  or  out"  or 
through  freight  movements. 

After  getting  the  number  of  tons  of  freight  (including  weights  of  cars) 
per  day  in  each  of  these  three  classes  of  freight  movement,  by  assuming  the 


300  ADDRESSES  OF  SAMUEL  INSULL 

average  distance  traveled  in  each  class  of  movement,  the  ton-miles  were  ob- 
tained.   The  mileages  assumed  were: 


Through  freight . 
Switching 


. .   7  miles 


It  may  seem  surprising  that  the  average  transfer  haul  is  longer  than  the 
average  in-or-out  haul,  but  this  is  undoubtedly  true.  The  list  previously  given 
shows  2,378  transfer  locomotive-hours  per  day  as  against  812  through-freight 
locomotive-hours. 

Knowing  the  average  ton-miles  per  hour  and  applying  figures  for  watt- 
hours  per  ton-mile,"  the  average  electrical  load  was  obtained.  The  table  on  the 
opposite  page  shows  the  results  of  these  computations. 

As  the  1903  interchange  report  only  covered  the  eighteen  principal  trunk- 
line  railroads,  the  figures  thus  obtained  serve  only  to  check  a  part  of  the 
results  arrived  at  by  the  other  methods. 

REFERENCES 

Edward  P.  Burch.— "Electric  Traction  for  Railway  Trains." 

L  C  Fritch,  Chief  Engineer  Chicago  Great  Western  R.  R.,  formerly  Consulting  Engineer 
Illinois  Central  R.  R. — "Investigation  on  Proposed  Electrification  of  Illinois  Central 

P.  Junkersfeld. — "Power  Supply  for  Terminal  Electrification  of  Railways  Entering  Chicago, 

1909  " 
W.  S.  Murray,  Electrical  Engineer  N.  Y.,  New  Haven  &  H.  R.  R.  R.— Proo.  A.  I.  E.  E., 

June,  1911,  "Electrification  Analyzed."  _..._,. 

W.  J.  Wilgus,  formerly  with  N.  Y.  Central  &  H.  R.  R.  R. — Paper,  Am.  Soc.  Civil  Engineers, 

B.  F.  Wood,  Asst.  Engineer  Pennsylvania  R.  R.— Proc.  A.  I.  E.  E.,  June,  1911,  "Opera- 
tion of  West  Jersey  &  Sea  Shore,  R.  R. "  Paper,  The  Altoona  Railroad  Club,  March, 
1909,  "Electric  Traction." 

Department  of  Smoke  Inspection,  Chicago. — Report  of  February,  1911. 

Report  —  "Assembling  and  Interchange,  Chicago,  Illinois,"  by  Committee  of  Railroad 
Officials,  1903. 

DETERMINATION  OF  ELECTRIC  POWER  REQUIRED  TO  OPERATE  PASSENGER 
TRAINS  AT  CHICAGO  TERMINALS 

General  Plan. — Observations  were  made  on  a  mid-week  day  between  4 
and  5  p.m.  as  to  the  number  and  kind  of  cars  making  up  each  train  entering 
and  leaving  each  of  the  six  passenger  stations  now  in  operation. 

At  the  Northwestern  station  and  the  Grand  Central  station  these  observa- 
tions were  extended  to  include  all  trains  entering  and  leaving  the  station 
throughout  a  twenty-four-hour  period,  these  two  being  chosen  as  the  ones 
representing  the  heaviest  and  lightest  traffic,  respectively. 

From  the  data  secured  by  observations  average  weights  of  trains  for  the 
different  classes  of  service  were  derived,  and  from  these  weights  and  the  special 
time  schedules  prepared  by  the  railroads  for  the  use  of  their  employees,  the 
running  time  and  average  kilowatt  demand  for  each  train  were  calculated  for 
all  through  trains  for  the  entire  twenty-four  hours.  Twenty-four-hour  load 
curves  were  plotted  from  average  weights  of  trains  for  the  suburban  service 
of  the  Northwestern  and  LaSalle  Street  stations,  these  stations  being  taken  as 
typical  of  the  suburban  service  of  other  stations. 

Through  trains  were  considered  as  being  operated  by  locomotives  and 
suburban  trains  as  being  made  up  of  multiple-unit  cars  similar  to  those  used 
by  the  New  York  Central,  with  two  trailers  to  three  motor  cars.  From  these 
train  diagrams,  load  curves  were  derived  for  the  rush  hours  from  four  to  eight 
o'clock  for  the  six  terminal  stations,  the  curve  for  through  trains  being  de- 
termined separately  from  that  of  the  suburban  trains. 

From  the  observations  taken  in  the  other  stations  between  4  and  8  p.m. 
suburban  load  curves  were  plotted  for  those  hours  and  a  total  curve  for  subur- 


RAILROAD  ELECTRIFICATION 


301 


CiC^OC^COTt<C^iOCOcOI> 


o    S. 

•as 


g         2"     2"  S  S     8 

C^-H^lMr-Hr-HiO'-ICOe^TtH  rH 


.sis! 
I  "sH  I 


M      £ 

i    I 

•<    £ 


r'^ 

r-T  <N  o  o  co  o  •*  IN  co"  os  •*  cT  co"  (C  oo  oo  CD  >o 

OCOCOiO'J'aiuSCOt^Tttt^lNl^^^rtiOCM 


co  o     10  ^H"  t~T  tC  co 

rtCDCNt^-*iCNCO 


<NO'-ii-*»O^OCOOOC^^Ot^ 

T  TjT  CD"  od  o>  •*  co"  <N 


O    O    O    00    O 


«  S  3  co  CD  5_  o  o  S  S 

lCiOlMO-^o^-*>0-* 
CDCO^HCO*OtOOOcOCOCO 
,5^(Nr-.oOCO'OOCOrt 


THrJ4COt*»-ll^OT^CDOO5O'— IGO'-'CD'^CO 

o  eq  <N  oo  co  •*  o>_  ^  eo  t-  o  o  o  to  oq  i-<  o  •* 

" 


tf 

PJ          | 

«       H 


302 


ADDRESSES  OF  SAMUEL  INSULL 


ban  trains  made  up  for  the  hours  of  4  to  8  p.m.,  thus  fixing  the  maximum  for 
the  suburban  service  at  all  stations. 

Having  determined  the  ratio  of  the  combined  suburban  curve  of  the  North- 
western and  LaSalle  Street  stations  to  the  total  suburban  curve  for  the  hours 
of  4  to  8  p.m.,  this  ratio  was  applied  to  the  Northwestern  and  LaSalle  Street 
stations'  suburban  curve  for  the  remainder  of  the  twenty-four  hours  in  order 
to  get  the  total  suburban  load  curve. 

Twenty  per  cent  was  added  to  the  through-train  load  to  allow  for  increased 
traction  due  to  cold  weather  and  fifty  per  cent  to  suburban  train  load  for 

TOTAL  LOAD  CHICAGO  THROUGH  TRAINS 


Time 

Grand 
Central 

N.  W. 

LaSalle 

Union 

Dearborn 

i.e. 

Total 
kw. 

A.  M.  12:00 

1600 

1470 

2090 

1340 

6,500 

12:30 

360 

610 

1470 

340 

1180 

3,960 

1:00 

360 

610 

970 

1:30 

250 

'730 

980 

2:00 

1180 

1,180 

2:30 

1190 

'726 

1,910 

3:00 

'620 

1400 

1900 

590 

i490 

6,000 

3:30 

580 

1360 

1,940 

4:00 

4:30 

140 

iio 

5:00 

140 

'ieo 

300 

5:30 

'556 

550 

6:00 

560 

i750 

'996 

550 

3,850 

6:30 

560 

liso 

3940 

4220 

2860 

1570 

14,330 

7:00 

280 

1760 

1760 

3540 

2640 

2710 

15,310 

7:30 

530 

2400 

4650 

3880 

2710 

2370 

16,540 

8:00 

1270 

1990 

3280 

3990 

940 

940 

12,410 

8:30 

1130 

3350 

4450 

2390 

810 

940 

13,070 

9:00 

1140 

3060 

3100 

3000 

3100 

390 

13,790 

9:30 

2750 

2620 

3330 

3300 

1680 

13,680 

10:00 

370 

2810 

1830 

4220 

750 

3280 

13,260 

10:30 

370 

1320 

3830 

2410 

1090 

2590 

11,610 

11:00 

3750 

3170 

1600 

1270 

1050 

10,840 

11:30 

1050 

1600 

2200 

1810 

540 

7,200 

P.  M.  12:00 

310 

1050 

2280 

2060 

1950 

580 

8,230 

12:30 

580 

720 

1510 

2710 

570 

6,090 

1:00 

960 

560 

1930 

'766 

650 

1280 

6,080 

1:30 

2080 

1940 

1730 

540 

1200 

7,490 

2:00 

200 

1160 

1900 

540 

3,800 

2:30 

850 

2420 

3,270 

3:00 

470 

1250 

1580 

i670 

i7o6 

ii20 

7,790 

3:30 

1650 

3000 

1380 

980 

560 

7,570 

4:00 

890 

930 

1240 

1880 

590 

450 

5,980 

4:30 

890 

1890 

2630 

2520 

1550 

2070 

11,550 

5:00 
5:30 

730 
270 

750 
1040 

3280 
4190 

2230 
3530 

1580 
1160 

930 
930 

9,500 
11,120 

6:00 
6:30 
7:00 

440 
930 
320 

750 
3080 
2240 

2530 
630 
1340 

2730 
2490 

1300 
'926 

1530 
1530 
1780 

9,280 
8,660 
6,600 

7:30 
8:00 
8:30 
9:00 
9:30 
10:00 
10:30 
11:00 
11:30 

840 
870 
870 

430 

460 
1010 
3000 
1480 

'eio 

1800 
1200 

1300 
1660 
2510 
3010 
1860 
940 
1990 
980 
2310 

iseo 

2350 
3160 
1480 
590 
2950 
3410 
590 

590 
720 
1370 
2900 
2080 
1140 
870 
510 
1710 

1860 
1820 
1810 
1710 
1630 
1660 
580 

5,770 
7,560 
11,850 
10,580 
7,000 
8,170 
9,520 
3,280 
4,450 

12:00 

1600 

i470 

2090 

isio 

6,500 

months  ab°Ve  figures  do  not  include  the  allowance  for  increased  traction  during  winter 

RAILROAD  ELECTRIFICATION  303 

increased  traction  and  electric  light  and  heating.     From  these  increased  values 
the  load  curve  for  the  winter  months  was  made  up. 

The  schedule  of  percentages  of  increase  added  during  the  fall  and  spring 
months  for  increased  traction  and  heating  which  was  used  in  connection  with 
the  freight  power  data,  was  applied  to  the  passenger  load  curve  for  the  purpose 
of  determining  the  kilowatt-hour  consumption  for  the  different  months  of  the 
year  and  the  annual  kilowatt-hour  consumption. 

Train  Weights. — The  weights  of  trains  were  calculated  on  the  following 
basis: 

Locomotives 110  tons 

Baggage,  express  and  combination  cars 60  tons 

Day  coaches 40  tons 

Ordinary  Pullmans 62J£  tons 

Steel  Pullmans 75  tons 

Diners 56  tons 

Trailer  cars  (suburban) 40  tons 

Method  of  Calculation. — From  the  total  weight  of  the  train  and  the  distance 
traveled  in  the  zone  the  ton-miles  were  derived.  For  locomotive  trains  an 
energy  consumption  of  40  watt-hours  per  ton-mile  was  assumed;  for  the  express 
run  of  suburban  trains,  55  watt-hours  per  ton-mile,  and  for  the  local  run  of 
express  and  local  trains,  where  stops  are  frequent,  120  watt-hours  per  ton-mile. 
From  the  kilowatt-hours  used  by  the  train  and  the  elapsed  time  as  figured 
from  the  time  schedules,  the  average  kilowatts  required  by  the  train  during  the 
time  of  its  run  was  calculated. 

From  the  kilowatt  demand  of  the  trains  the  load  curve  was  made  up  by  the 
use  of  a  train  diagram  showing  the  number  of  trains  and  the  power  taken  by 
them  at  each  half-hour  interval  except  during  the  peak  hours  when  the  calcula- 
tions were  made  for  each  fifteen  minutes. 

Fig.  22  shows  how  the  through  passenger  load  would  vary  throughout  the 
year,  making  proper  allowances  for  increased  traction  due  to  cold  weather,  also 
talcing  into  account  the  variation  in  the  amount  of  business  done.  It  is  assumed 
that  the  amount  of  energy  required  for  the  different  months,  exclusive  of  trac- 
tion due  to  cold,  would  differ  from  January  by  a  percentage  equal  to  one-half 
the  per  cent  difference  between  the  earnings  for  January  and  the  other  months 
of  the  year. 

Fig.  23  shows  the  suburban  requirements  of  the  year.  The  normal  require- 
ments are  assumed  as  constant,  and  the  additional  due  to  increased  traction 
and  heat  are  shown. 


SUMMARY  ELECTRICAL  REQUIREMENTS  FOR  PASSENGER  SERVICE 

Normal  Requirements. — The  suburban  service  is  assumed  the  same  as 
January  throughout  the  year.  Sundays,  for  the  suburban  service,  are  assumed 
to  have  33^  per  cent  of  week-day  requirements. 

REQUIREMENTS  OVER  NORMAL 


Suburban  and  Through. 
Increased  traction  on 
account  of  cold. 

Suburban  Only. 
Heat 
15  per  cent 

20  per  cent 

30  per  cent 

30  per  cent 

TT  K 

...          20  per  cent 

30  per  cent 

March  
Aoril... 

15  per  cent 
5  per  cent 

20  per  cent 
10  per  cent 

304 


ADDRESSES  OF  SAMUEL  INSULL 


Coincident  maximum  kilowatts 

over  January  ex- 
pressed in  per 

Through 

Suburban 

Light  and  power 
for  depots,  offices, 

Grand 

shops,  etc. 

July,  1911  
August  

12.6 
18.8 
17  G 

11,490 
12,120 
12,000 

37,310 
37,310 
37,310 

3550 
3550 
4000 

52,350 
52,980 
53,310 

October  
November  
December  
January,  1912.  . 

10.4 
5.9 
5.7 

02 

11,260 
11,880 
12,940 
12,240 
12,260 

37,310 
46,640 
55,960 
55,960 
55,960 

4250 
4570 
4850 
4850 
4570 

52,820 
63,090 
73,750 
73,750 
72,790 

March 

0.3 

11,760 

50,370 

4250 

66,380 

April  

1.7 
2.6 

10,890 
10,470 

42,910 
37,310 

4000 
3550 

57,800 
51,330 

May  

June  

10.3 

11,250 

37,310 

3550 

52,110 

Kilowa 

tt-houra 

Through 

Suburban 

Light  and 
power  per 
month 

Grand 

Load 
factor 

July,  1911  
August  
September  
October  
November  
December  
January,  1912.. 
February  
March  
April  
May  

6,633,600 
7,045,700 
6,743.500 
6.504.000 
6,680,000 
7,472,500 
7,116,800 
6,658,700 
6,795,500 
6,123,400 
6,085.000 
6  281  700 

5,679,200 
5,816,700 
5,611,400 
5,679,200 
7,014,300 
8,518,800 
8,725,100 
8,109,200 
7,666,900 
6,453,100 
5,816,700 
5  473  800 

1,850,200 
1.882,700 
1,836,500 
1,895,000 
1,895,000 
2,068,000 
2,104,200 
1,816,600 
1,895,000 
1,836,500 
1,882,700 
1  785  300 

14,163,000 
14,745,100 
14,191,400 
14,078,200 
15,589,300 
18,059,300 
17,946,100 
16,584,500 
16,357,400 
14,413,000 
13,784,400 
13  540  800 

36.4% 
37.4% 
36.9% 
35.8% 
34.3% 
32.8% 
32.9% 
32.7% 
33.1% 
34.6% 
36     % 
36   1% 

Total  

80,140,400 

80,564,400 

22,747,700 

183,452,500 

28.3% 

Through-train  requirements  for  different  months  were  obtained  by  increas- 
ing the  January  figures  by  one-half  the  excess  of  the  daily  passenger  earnings 
of  those  months.  Sunday,  for  through  trains,  is  taken  as  80  per  cent  of  a  week- 
day. 

The  energy  required  for  light  and  power  for  depots,  offices,  shops,  etc., 
battery  charging  and  operating  switches  is  assumed  at  5000  kw.  maximum 
and  50  per  cent  annual  load  factor. 

CALCULATION  OF  TRANSMISSION  AND  CONVERSION  SYSTEM  FOR  PASSENGER 
AND  FREIGHT  LOADS 

To  determine  the  location  and  size  of  substations  required  for  the  supply 
of  the  third-rail  system,  the  positions  of  all  passenger  trains  which  will  be 
operating  in  the  Electric  Zone  at  6:05  p.m.,  the  time  of  the  evening  peak,  were 
indicated  upon  a  railroad  map  at  Chicago,  these  positions  being  determined 
from  the  train  schedules.  No  train  schedules  were  available  for  freight  trains, 
and  it  was  therefore  necessary  to  locate  these  on  the  map  in  amounts  approx- 
imately equal  to  the  demand  of  a  single  train,  chiefly  near  the  freight  yards 
where  switching  is  the  heaviest,  a  few  trains  being  located  along  the  main  line. 

Two  general  plans  of  power  supply  were  assumed,  (a)  based  on  the  installa- 
tion of  a  separate  power  system  for  each  road  or  group  of  roads  using  the  same 
tracks  or  operating  under  allied  financial  interests,  and  (b)  based  upon  the 
entire  power  supply  being  operated  as  a  unified  system,  the  energy  being  derived 
from  the  nearest  station  of  the  Commonwealth  Edison  Company  or  the  Public 


RAILROAD  ELECTRIFICATION  305 

Service  Company  of  Northern  Illinois,  and  all  stations  being  used  to  supply 
all  the  roads  which  came  within  an  economical  radius  thereof. 

The  position  of  substations  was  then  fixed  by  allowing  a  distance  of  four  to 
five  miles  apart  on  the  larger  roads  and  six  miles  apart  on  the  smaller  ones. 

In  scheme  (a)  where  operation  is  contemplated  by  groups,  power  houses 
were  located  at  points  where  condensing  water  was  available  where  it  was 
possible  to  secure  such  sites  within  a  reasonable  distance  of  the  railroad  com- 
pany's tracks. 

However,  in  the  smaller  system  where  the  loads  were  from  5,000  to  10,000 
kw.  this  was  not  entirely  feasible,  and  sites  were  selected  in  some  cases  with 
reference  to  the  distribution  of  the  load. 

In  selecting  the  rating  for  generating  stations  under  group  operation,  it 
was  considered  that  from  50  per  cent  to  75  per  cent  surplus  would  be  re- 
quired to  take  care  of  swings  in  the  load  and  provide  suitable  reserve. 

Fig.  25  shows  swings  of  nearly  100  per  cent  over  one-hour  maximum  for 
New  York,  New  Haven  &  Hartford  Cos  Cob  station. 

Transmission  lines  were  laid  out  on  a  basis  of  a  line  for  each  3000  kw.  of  load 
with  a  reserve  line  for  each  substation.  The  reserve  supply  was  secured  in  the 
smaller  substations  by  using  one  line  with  taps  to  two  or  three  substations. 

In  the  plan  for  unified  power  supply  it  was  assumed  that  the  present  600- volt 
substations  of  the  surface  and  elevated  roads  would  be  available,  when  increased 
in  size,  as  sources  of  600-volt  supply  for  all  roads  coming  within  an  economical 
range  of  their  distribution,  and  the  necessary  number  of  additional  lines  to 
these  substations  to  supply  the  steam-railroad  load  is  included  in  the  estimates. 

It  is  assumed  that  transmission  lines  would  be  run  overhead  along  the  rail- 
road company's  right-of-way  in  the  outlying  portions  of  the  city  where  steel- 
pole  construction  of  a  substantial  character  could  be  employed.  Wherever 
lines  were  run  on  public  streets  it  was  assumed  that  they  would  be  carried 
underground. 

SUMMARY  OF  RESULTS 

Under  a  unified  plan  of  power  supply,  only  21  additional  substations  would 
have  to  be  established,  and  the  total  number  would  be  only  43  as  compared 
with  72  substations  under  group  operation. 

The  number  of  transmission  lines  under  the  unified  plan  would  be  81  as 
compared  with  132  under  group  operation,  and  there  would  be  over  2 . 5  times 
the  length  of  line  required  for  group  operation  as  compared  with  the  unified 
plan. 

The  data  for  the  unified  plan  are  as  follows: 

Number  of  substations 43 

Number  of  lines 81 

Rating  of  substations,  kw 205,000 

Rating  of  generating  stations,  kw 142,000 

Length  of  lines,  feet 1,390,000 

The  data  for  group  operation  appear  in  the  table  on  the  next  page. 

A  comparison  of  the  investment  necessary  for  unified  power  supply,  as 
compared  with  a  separate  supply  for  each  road  or  group  of  roads,  shows  the 
following  saving  in  favor  of  unified  power  supply: 

Power-house  rating 99,500  kw. 

Substation  rating 39,500  kw. 

Transmission-line  cables  in  feet 2,283,000  kw. 

In  addition  to  this  saving,  there  is  a  corresponding  saving  in  conduit  con- 
struction, where  the  lines  are  underground,  and  in  pole-line  construction,  where 
the  lines  are  overhead. 


306  ADDRESSES  OF  SAMUEL  INSULL 

*»'  •»   **  *5  «         *J  «         £   *»  £      .  £ 


o-2 

U 


I   I 


ee        ei«w     ' 


ll§ 


CO  IN    U5    IN    10    •* 


cd       t>: 


^  ^  "       H 

od       o»  6  J  ci 


RAILROAD   ELECTRIFICATION 


307 


There  is  also  a  corresponding,  and  possibly  even  greater,  saving  in  the 
600-volt  feeder,  cable  and  conduit  or  pole  lines. 

It  must  also  be  borne  in  mind  that  where  the  stations  and  substations  are  of 
larger  average  size,  the  investment  per  kilowatt  is  less  than  where  the  same  load 
is  distributed  over  a  larger  number  of  stations  and  substations.  This  same 
principle  applies  to  transmission  and  distribution  cable  and  conduit,  and  pole 
lines. 

Also  the  same  principle  applies,  to  fully  as  great  an  extent,  to  the  operating 
and  maintenance  cost  of  stations,  substations  and  lines. 

SUMMARY 
TOTAL  ELECTRICAL  REQUIREMENTS— ALL  STEAM  ROADS 


Load  at  time  of  monthly  maximum  demand 

Freight 

Passenger 

Total 

July,  1911  

54,250 
62,700 
67,500 
70,900 
76,700 
73,000 
67,000 
69,000 
68,800 
61,400 
59,400 
59,300 

52,350 
52,980 
53,310 
52,820 
63,090 
73,750 
73,020 
72,790 
66,380 
57,800 
51,330 
52,110 

106,600 
115,680 
120,810 
123,720 
139,790 
146,750 
140,020 
141,790 
135,180 
119,200 
110,730 
111,410 

October  

December  
January,  1912  

March  
April 

May  
June  

Kilowatt-hours 

Freight 

Passenger 

Total 

factor 

July,  1911  

28,814,400 
33  303  600 

14,163,000 
14  745  100 

42,977,400 
48  048  700 

54.3% 
55  8% 

34  624  800 

14,191,400 

48,816,200 

56.2% 

October  

37,636,200 
39  312  000 

14,078,200 
15  589  300 

51,714,400 
54,901  300 

56.4% 
54  7% 

December  
January,  1912  
February 

38,732,400 
35,600,400 
32  853  600 

18,059,300 
17,946,100 
16584  500 

56,791,700 
53,546,500 
49,438,100 

52     % 
51  59^ 

5i!s% 

March  

36,540,000 
31  500  000 

16,357,400 
14413000 

52,897,400 
45,913  000 

52.5% 
53  4% 

May 

31  528  800 

13,784,400 

45,313,200 

55     % 

June  

30,391,000 

13,540,800 

43,931,800 

55     % 

Total  

410,837,200 

1  83,452,500 

594,289,700 

46.2% 

DISCUSSION  FOLLOWING  THE  ADDRESS  ON 

"THE  RELATION  OF  CENTRAL-STATION 

GENERATION  TO  RAILROAD 

ELECTRIFICATION" 

ATER  Mr.  Insull  had  made  his  address  of  April  5,  1912, 
before  the  American  Institute  of  Electrical  Engineers 
in  New  York,  on  "The  Relation  of  Central-Station 
Generation  to  Railroad  Electrification,"  as  reprinted  in  the 
preceding  chapter,  an  interesting  discussion  ensued.  Some  of 
the  principal  points  brought  out  are  given  here1  in  brief. 

JOHN  W.  LIES,  JR.,  of  the  New  York  Edison  Company,  the 
first  speaker  to  follow  Mr.  Insull,  said,  in  effect,  that  the  In- 
stitute had  had  too  few  fundamental  papers  of  this  character. 
He  said  that  he  believed  the  economic  possibilities  of  the  situa- 
tion would  have  an  important  bearing  on  the  engineering  ques- 
tions of  varying  frequencies  and  systems.  He  believed  that 
every  member  was  under  deep  obligation  to  Mr.  Insull  for  his 
important  address. 

DUGALD  C.  JACKSON,  professor  in  Massachusetts  Institute 
of  Technology,  Boston,  declared  that  a  presentation  of  this 
kind  must  go  far  toward  bringing  economic  views  and  en- 
gineering views  into  harmony. 

WILLIAM  S.  MURRAY,  then  electrical  engineer  of  the  New 
York,  New  Haven  and  Hartford  Railroad,  said  that,  speaking 
as  a  railroad  man,  he  regarded  the  paper  as  "a  new  light  —  al- 
most a  light  in  the  darkness." 

CHARLES  P.  STEINMETZ,  consulting  engineer  for  the  General 
Electric  Company,  Schenectady,  N.  Y.,  said  that  the  paper 

1.  The  discussion  is  given  in  greater  detail  in  the  Transactions  of  the 
American  Institute  of  Electrical  Engineers,  Part  I  of  Vol.  XXXI,  p.  283 
etseq. 

308 


ELECTRIFICATION  DISCUSSED  309 

announces  the  approach  of  a  new  era  in  the  electrical  industry. 
Dr.  Steinmetz  also  made  the  point  that  concentration  of 
electrical  production  and  primary  distribution  permits  the 
utilization  of  a  diversity  factor  in  engineering  talent.  No 
small  system  or  utility  employing  electricity  can  hope  to  em- 
ploy the  high  grade  of  engineering  advice  obtainable  by  the 
great  electricity-supply  system. 

LEWIS  B.  STILLWELL,  consulting  engineer,  New  York,  made 
the  comment  that  the  advantages  that  accrue  from  the  utiliza- 
tion of  the  diversity  factor  decrease  rather  rapidly  as  the  size 
of  the  individual  aggregated  plants  increases.  The  speaker 
noted  the  fact  that  within  eight  years  the  improvement  in 
prime  movers  had  been  such  that  a  saving  in  coal  amounting 
to  about  SO  per  cent  had  been  brought  about.  That  is  a  factor 
that  assists  materially  in  carrying  out  the  general  idea  of  cen- 
tralization.- 

C.  A.  COFFIN,  president  of  the  General  Electric  Company, 
Schenectady,  N.  Y.,  paid  a  brief  tribute  to  the  work  of  men 
like  Mr.  Insull,  Mr.  Sprague  and  others. 

BENJAMIN  F.  WOOD,  of  the  Pennsylvania  Railroad,  Altoona, 
Pa.,  said  that  the  generating  station  and  other  electrical  equip- 
ment of  his  company  at  the  New  York  terminal  represented 
an  expenditure  of  about  $8,000,000.  Half  of  this  would  have 
been  saved  if  electrical  energy  had  been  purchased.  Further, 
if  the  energy  could  have  been  purchased  at  the  rates  prevail- 
ing in  Chicago,  the  company  could  have  paid  a  dividend  of 
about  6  per  cent  on  the  other  $4,000,000.  "We  are  not  the 
guilty  one,"  declared  Mr.  Wood. 

CARY  T.  HUTCHINSON,  consulting  engineer,  New  York, 
discussed  the  cost  of  producing  electrical  energy  in  Chicago. 
He  had  a  colloquy  with  Mr.  Insull  on  the  subject.  Dr. 
Hutchinson  said  in  conclusion  that  the  whole  point,  in  spite 
of  the  saving  in  cost  of  production,  was  the  price  to  the  user. 

BION  J.  ARNOLD,  consulting  engineer,  Chicago,  after 
mentioning  the  fact  that  the  Commonwealth  Edison  Company 
possessed  one  of  the  most  economical  plants  in  the  world  for  the 
production  of  electrical  energy,  dwelt  on  the  large  and  well 


310  ADDRESSES  OF  SAMUEL  INSULL 

managed  plant's  ability  to  discard  obsolete  machinery,  being 
able  to  stand  the  obsolescence  loss.  The  speaker  also  dis- 
cussed the  thermal  efficiency  of  generating  stations,  and  said 
that  after  10,000-kilowatt  units  have  been  reached  the  thermal 
emciency  remains  nearly  constant.  Referring  to  the  New  York 
Central  Railroad's  generating  stations  near  New  York,  de- 
signed eight  or  nine  years  before,  Mr.  Arnold  made  the  point 
that  what  might  be  regarded  as  errors  now  in  relation  to  the 
economics  of  electricity  supply  were  not  errors  then.  Mr. 
Arnold  expressed  himself  as  in  sympathy  with  Mr.  Insult's 
policies. 

FRANK  J.  SPRAGUE,  consulting  engineer,  New  York,  alluded 
to  the  very  great  importance  of  increasing  the  efficiency  of 
power  production.  He  looks  forward  to  the  time  when  a  com- 
paratively few  great  central  stations  will  replace  the  thousands 
of  small  plants  of  today.  He  mentioned  the  waste  of  water  in 
a  large  city  like  New  York,  due  to  the  number  of  small  non- 
condensing  steam-engine  plants.  He  extended  his  personal 
thanks  to  Mr.  Insull  for  an  epoch-making  paper. 

OPPOSITION  TO  ECONOMIC  WASTE 

MR.  INSULL  (after  discussing  with  Mr.  Stillwell  a  tentative 
question  of  long-distance  power  supply  and  closing  the  discus- 
sion) :  I  did  not  come  down  here  to  discuss  the  cost  and  selling 
price  of  the  Commonwealth  Edison  Company's  commodity. 
I  am  not  here  to  sell  my  own  goods.  I  do  not  need  to  make  any 
answer  as  to  whether  my  prices  are  high  or  low,  except  to  take 
the  exact  statement  made  by  Mr.  Wood  as  to  what  would  have 
been  the  advantage  to  the  Pennsylvania  Railroad  if  it  had  pur- 
chased energy  on  the  same  basis  on  which  I  am  selling  it  in 
Chicago.  If  you  will  refer  to  some  of  your  older  records  you 
will  find,  also,  that  Mr.  Wood  made  practically  the  same  state- 
ment with  reference  to  the  West  Jersey  and  Seashore  Railroad. 

I  was  dealing  with  the  matter  on  a  broad  basis.  Probably 
outside  of  the  very  large  traction  companies  in  Chicago,  I  am 
one  of  the  largest  purchasers  of  energy  in  this  country.  In 
other  words,  I  take  a  dose  of  my  own  medicine. 


ELECTRIFICATION  DISCUSSED  311 

Of  course,  in  dealing  with  the  situation  I  have  naturally 
had  to  refer  to  New  York.  It  is  the  subject  uppermost  in 
the  minds  of  you  people.  So,  of  course,  I  took  New  York 
as  the  basis  of  my  figuring  and  compared  it  with  the  results 
we  have  obtained  in  Chicago.  But  it  matters  not  to  me  who 
is  the  owner  of  the  generating  plant  and  the  primary  trans- 
mission system.  I  do  not  care  whether  it  is  the  local  lighting 
company,  whether  it  is  the  local  railway  company,  or  whether 
it  is  the  steam-railroad  company;  the  principle  is  the  thing  I  am 
contending  for.  I  am  contending  against  economic  waste. 
When  I  speak  of  "purchased  power"  I  simply  use  that  term 
because  it  has  come  to  be  used  in  the  industry  as  designating  a 
difference  between  making  your  own  power  and  buying  it  from 
some  one  else.  I  say  again  that  I  think  it  would  be  a  great 
misfortune  if,  as  the  result  of  this  meeting,  or  as  the  result  of  the 
agitation  that  is  going  on  throughout  the  industry  on  this  sub- 
ject, some  move  is  not  made  with  reference  to  the  concentra- 
tion of  the  manufacture  and  primary  distribution  of  electricity. 
I  think  one  is  almost  as  important  as  the  other. 

LIMITS  OF  ECONOMICAL  PRODUCTION  NOT  REACHED 

There  are  some  other  serious  questions  of  an  engineering 
character  to  be  decided  within  the  next  year  or  two  on  this 
subject.  I  do  not  know  at  this  time  what  the  limit  of  size  of 
unit  is  that  will  show  the  greatest  efficiency.  I  have  con- 
sulted the  best  experts  I  can  find  on  both  sides  of  the  ocean. 
The  question  of  size  of  unit  comes  in  very  much  in  this  question 
of  concentration  of  production  of  energy.  I  do  not  think  we 
have  by  any  means  reached  the  economical  limits  of  the  cost  of 
production.  I  do  not  think  it  is  possible  for  any  ordinary 
public-service  company,  by  itself,  doing  just  purely  its  own 
business,  to  take  advantage  of  the  economical  limit  when  we 
reach  it.  I  think  it  can  only  be  done  by  an  aggregation  of 
companies. 

There  are  a  good  many  things  we  can  learn  to  advantage 
from  our  neighbors.  I  have  been  for  a  good  many  years  in 
the  habit  of  sending  my  engineers  to  Europe  to  see  what  they 


312  ADDRESSES  OF  SAMUEL  INSULL 

can  find  out.  We  find  that  we  get  full  value  for  the  expense  of 
the  trips.  I  do  not  know  of  any  case  on  the  other  side  where 
steam-railroad  electrification  on  any  considerable  scale  has 
been  started  and  the  railroad  companies  have  built  their  own 
generating  stations.  They  go  a  great  deal  deeper  into  the 
economies  of  things  than  we  do  in  this  country.  We  make 
money  easier  here;  we  have  greater  markets.  We  can  take  a 
lesson  from  their  experience. 

I  make  one  suggestion  to  the  Railway  Committee  of  the 
Institute.  Take  the  remarkable  situation  you  have  here  on  the 
Atlantic  seaboard,  with  great  density  of  population  in  the  small 
amount  of  territory  between  Philadelphia  and  Boston.  Take 
Philadelphia,  New  York  and  Boston,  nuclei  of  areas  stretching 
out  as  three  fans;  take  places  like  the  Connecticut  manufactur- 
ing towns;  go  along  the  Boston  and  Albany  Railroad  to  Al- 
bany, and  then  cross  New  Jersey,  through  Pennsylvania  to  the 
south  of  Philadelphia.  Figure  out  the  money  that  can  be 
saved  by  putting  all  the  generation  of  electricity  in  that  ter- 
ritory under  one  ownership.  I  do  not  care  who  owns  the  generat- 
ing plant,  whether  it  is  the  railroad  company  or  the  lighting 
company  or  the  traction  company;  but  I  venture  to  say  that 
the  amount  of  money  you  would  save  would  not  only  be  suf- 
ficient to  build  the  transmission  lines  and  the  generating  sta- 
tions of  steam  railroads  in  that  territory,  but  I  think  it  would 
go  a  long  way  toward  equipping  the  railroads  themselves. 

DISCUSSION  AT  BOSTON  ON  JUNE  26  AND  27,  19121 

FRANK  J.  SPRAGUE  explained  how  Mr.  Insult's  address  to 
the  Institute  came  to  be  made.  He  told  something  about  the 
electrification  agitation  in  Chicago  and  advocated  the  creation 
of  an  independent  financial  organization  to  stand  between  the 
electrical  manufacturing  companies  and  the  railroad  companies 
in  electrification  enterprises. 

H.  G.  STOTT,  superintendent  of  motive  power  of  Inter- 

1.  At  the  suggestion  of  Mr.  Sprague,  discussion  of  Mr.  Insull's  paper  was 
resumed  at  the  annual  convention  of  the  Institute. 


ELECTRIFICATION  DISCUSSED  313 

borough  Rapid  Transit  Company,  New  York,  contended  that 
Mr.  Insull's  results  in  Chicago  were  obtained  not  by  combining 
first-class  plants  but  by  combining  in  one  or  two  plants  the 
output  from  a  number  of  practically  broken-down  plants  — 
plants  ripe  for  reconstruction.  Mr.  Stott  took  issue  with  Mr. 
Insull  on  the  question  of  concentrating  production  of  large, 
modern  plants.  He  thought  that  an  ideal  solution  would  be 
for  each  company  to  retain  its  own  plant,  thereby  preserving  its 
equity,  with  an  agreement  by  which  each  plant  should  supply 
all  power  within  its  own  zone  of  economical  distribution. 

WILLIAM  MCCLELLAN,  New  York,  thought  that  there 
should  be  no  jumping  at  conclusions  in  the  matter  of  utilizing 
the  diversity  factor  in  proposed  railroad  electrifications. 

PERCY  H.  THOMAS,  consulting  engineer,  New  York,  pointed 
out  that  the  trend  has  been  toward  centralization  since  the 
electrical  industry  came  into  being. 

W.  G.  CARLTON,  superintendent  of  power,  electrical  divi- 
sion, New  York  Central  Railroad,  New  York,  suggested  the 
possibility  of  "pooling"  generating  stations. 

CALVERT  TOWNLEY,  Westinghouse  Electric  and  Manufac- 
turing Company,  New  York,  said  that  he  realized  the  benefits 
of  concentration,  but  realized  also  that  the  principle  had 
limitations. 

W.  S.  LEE,  Southern  Power  Company,  Charlotte,  N.  C., 
held  that  there  should  be  large  generating-plant  units  in  dif- 
ferent parts  of  the  area  so  placed  that  each  should  carry  ap- 
proximately its  own  load,  being  at  the  same  time  interconnected 
with  the  others,  so  that  one  plant  could  help  out  another. 

MR.  SPRAGUE  said  that  of  course  concentration  should  not 
be  carried  to  an  absurd  or  unsafe  extreme,  as,  for  instance,  one 
generating  station  for  a  city  like  New  York  or  Chicago. 

WILLIAM  S.  MURRAY  explained  why  the  cost  of  generating 
energy  in  the  Cos  Cob  station  of  the  New  York,  New  Haven 
and  Hartford  Railroad  was  comparatively  high  at  that  time. 

WILLIAM  B.  JACKSON,  consulting  engineer,  Chicago,  drew 
attention  to  the  fact  that  the  electrification  of  railroads  is  only 
one  factor  entering  into  the  discussion  of  Mr.  Insull's  subject. 


314  ADDRESSES  OF  SAMUEL  INSULL 

No  one  could  take  exception  to  the  principle  of  the  paper. 
The  possibilities  of  unified  generation  and  transmission  of  elec- 
trical energy  are  very  great. 

LEE  H.  PARKER,  Stone  &  Webster  Engineering  Corporation, 
Boston,  said  that  he  did  not  see  any  reason  why  the  com- 
paratively small  amount  of  energy  required  for  the  proposed 
electrified  railroads  in  and  near  Boston  should  not  be  supplied 
by  any  one  of  the  large  energy-generating  companies  in  ex- 
istence in  Boston. 

C.  O.  MAILLOUX,  consulting  engineer,  New  York,  remarked 
that,  from  one  point  of  view,  it  might  be  well  for  both  the  spec- 
ialist in  the  production  of  electrical  energy  and  the  specialist  hi 
transportation  to  stick  to  his  specialty.  But  circumstances 
may  alter  cases.  Financially,  it  may  be  important  in  launch- 
ing, say,  a  traction  project  if  the  capital  required  for  the  gener- 
ating plant  can  be  omitted  from  the  total  investment.  Even 
if  the  man  interested  in  the  project  could  raise  the  capital,  it 
might  be  an  advantage  or  a  convenience  not  to  do  so.  Refer- 
ring specifically  to  the  paper,  Mr.  Mailloux  declared  that  it  is 
a  great  advantage  to  have  the  possibility  of  studying  the  mod- 
ern conditions  of  the  supply  of  electrical  energy  without  being 
compelled  to  go  into  that  business. 

P.  W.  SOTHMAN,  New  York,  gave  it  as  his  opinion  that 
railway  and  commercial  loads  might  well  be  combined.  Each 
case  must  be  studied  on  its  merits,  however. 

C.  L.  DE  MURALT,  New  York,  among  other  things,  said: 
"I  can  easily  conceive  of  his  [Mr.  Insull's]  having  in  mind 
the  supplying  of  all  of  the  United  States  from  one  single  net- 
work of  lines,  controlled  by  one  company,  which  owns  all 
sorts  of  power  stations  in  the  most  convenient  places  —  steam, 
hydraulic,  etc. —  and  I  do  not  doubt  for  one  moment  that  the 
country  would  benefit  by  such  a  combination,  provided  it 
could  be  properly  regulated." 

N.  W.  STORER,  general  engineer  of  railway  department  of 
Westinghouse  Electric  and  Manufacturing  Company,  East 
Pittsburgh,  Pa.,  gave  this  opinion:  "If  there  were  no  fears  on 
the  part  of  power  users  that  they  were  putting  their  business  in 


ELECTRIFICATION  DISCUSSED  315 

jeopardy  by  permitting  all  power  to  be  concentrated  by  one 
company,  there  is  not  a  particle  of  doubt  in  my  mind  that  con- 
centration would  be  made  in  the  near  future.  *  *  *  The 
ideal  system  which  Mr.  Insull  advocates  can  be  put  into  effect 
only  when  the  power  companies  are  put  under  the  control,  and 
the  prices  are  subject  to  the  regulation,  of  an  honest  and  efficient 
government." 

EDWARD  N.  LAKE,  Stone  &  Webster  Engineering  Cor- 
poration, asserted  that  the  Boston  Elevated  Railway  Company 
had  no  reason  to  question  its  wisdom  in  building  its  own 
generating  station,  in  view  of  the  rate  understood  to  have  been 
offered  by  the  Edison  Company  of  Boston. 

MR.  SPRAGUE,  in  closing  the  Boston  discussion,  reviewed 
briefly  some  of  the  engineering  methods  evolved  in  heavy  elec- 
tric railroading.  An  effort  should  be  made  to  get  uniform 
reports  from  railroads  which  have  been  electrified.  Electrical 
engineers  should  endeavor  to  get  the  facts,  no  matter  what  they 
are.  As  to  the  fundamental  fact  of  the  discussion,  everybody  is 
agreed  that  there  should  be  consolidation  of  power  houses 
sufficiently  large  and  well  equipped  to  insure  reliability,  safety 
and  economy. 


A  QUARTER-CENTURY  CENTRAL-STATION 

ANNIVERSARY  CELEBRATION  IN 

CHICAGO— 1887-19121 

CELEBRATING  tonight,  as  we  do,  our  twenty-fifth 
birthday,  it  affords  me  particular  pleasure  to  speak  to 
you.  I  remember  well  the  early  days  of  the  Chicago 
Edison  Company,  when,  instead  of  being  its  chief  executive, 
I  was  its  chief  manufacturer.2  Having  established  among  the 
directors  of  the  company  some  of  the  closest  friends  it  has  ever 
been  my  privilege  to  have,  and  partly  on  the  suggestion  I  made 
myself  to  my  friends,  the  late  Edward  L.  Brewster  and  Mr. 
Byron  L.  Smith,3 1  received  an  invitation  in  1892  to  become  the 
president  of  the  Chicago  Edison  Company.  Thus  I  was 
afforded  the  best  opportunity  that  I  knew  of  in  the  United 
States  to  develop  the  business  of  the  production  and  distribution 
of  electrical  energy. 

I  have  not  prepared  any  set  speech  for  this  evening.     I  have 
asked  my  assistants  to  prepare  for  me  a  number  of  pictures  and 

1.  The  twenty-fifth  anniversary  of  the  Chicago  Edison  Company  and  its 
successor,  the  Commonwealth  Edison  Company,  was  observed  on  April  29, 
1912.    The  meeting  was  held  in  Orchestra  Hall,  Chicago,  and  there  was  a 
large  audience.     It  was  given  under  the  auspices  of  the  Commonwealth  Edison 
Company  Section  of  the  National  Electric  Light  Association,  and  the  chair- 
man of  the  section  in  that  year,  Mr.  R.  F.  Schuchardt,  turned  the  meeting  over 
to  Mr.  L.  A.  Ferguson,  then  second  vice-president  of  the  Commonwealth  Edison 
Company,  who  presided  and  introduced  Mr.  Insull.     In  doing  so  Mr.  Ferguson 
remarked  that  in  the  twenty  years  of  Mr.  InsulTs  presidency  the  rating  of  the 
company's  generating  stations  had  increased  from  about  5,000  horsepower 
to  about  400,000  horsepower.    He  also  said  that  the  companies  of  which  Mr. 
Insull  was  the  chief  executive  officer  had  a  combined  capital  of  $175,000,000. 
Mr.  InsulTs  address  on  this  occasion  has  been  somewhat  condensed  from  the 
original  printing  in  The  Edison  Round  Table. 

2.  See  note  to  chapter  on  "Problems  of  the  Edison  Central-Station  Com- 
panies in  1897,"  page  1. 

3.  Mr.  Smith,  long  a  director  of  the  company  and  a  member  of  the  exec- 
utive committee,  died  in  1914. 

316 


ANNIVERSARY  CELEBRATION  317 

diagrams  that  will  enable  me  to  trace  the  birth  and  the  de- 
velopment of  the  industry  from  its  early  days  in  1881  up  to  the 
time  that  the  Chicago  Edison  Company  was  formed  in  1887; 
and  then  its  further  development  in  this  city,  with  some  com- 
parisons with  other  cities  during  the  last  ten  years. 

The  gentleman  whose  picture  I  present  to  you  [by  lantern 
slide]  needs  no  introduction.     He  has  always  taken  a  great 

THE  WESTERN   UNION  TELEGRAPH  COM  PAN  V"  "* 

C*BL£   SCRVIC t  TO  ALL  THE  WORLD 


RECEIVED  AT  to. tafen  tafcrri * U Uk a, Oqp ', 

to  25  D)   «z  48  Riisi 

Cringe  W  Apr  16  1912 


Co  the   twnty  fifth  anniversary  of  starting  the  old  Chicago 
Ici«cr  Cc  I  greet   the  eaployee*  of   Coanonvealth  E4i»on  Co 
«p<J  'congratulate  you  all   oo  the  etmoraaJly  progreaslTe  spirit  end 
•ork  that  t=a  lead    to   the  wonderful  degree  of   cuccrae  ye-j  have 
attained   In  quarter  of  a  century. 

•nxwsa  A  Ediscn 

545p«. 

interest  in  the  work  that  is  going  on  in  Chicago,  and  you  will 
find  a  message  from  him  suitable  to  this  occasion.1 

SOME  LANDMARKS  AND  RELICS 

The  view  which  is  presented  in  Fig.  1  is  one  of  the  old 
laboratory  buildings  at  Menlo  Park.  It  is  now  31  years  and  a 
little  over  —  to  be  strictly  correct,  31  years  and  four  weeks  — 
since  it  was  my  privilege  to  visit  Menlo  Park  for  the  first  time 
and  to  see  in  operation  the  first  incandescent-lighting  system 
established  there  experimentally.  This  proved  the  possibilities 
of  a  business  that  has  grown  from  that  small  beginning  in  the 
course  of  three  decades  to  a  business  that  today  employs  up- 
wards of  a  billion  and  a  half  of  capital. 

Shortly  after  the  experimental  station  was  started  at  Menlo 
Park,  Mr.  Edison  moved  into  New  York,  and  the  offices  of  the 
Edison  Electric  Light  Company  were  established  at  65  Fifth 
Avenue.  Fig.  2  shows  the  building,  which  was  turned  from  a 

1.  The  portrait  erf  Edison  is  given  as  the  frontispiece  of  this  volume. 


318  ADDRESSES  OF  SAMUEL  INSULL 

mansion  into  an  office.  Fig.  3  is  of  much  interest,  as  it  shows 
the  first  direct-connected  dynamo  to  be  used  commercially,  so 
far  as  I  am  aware.  The  machine  was  built  for  us  at  the  Twelfth 
Street  station  hi  New  York.  The  particular  view  is  that  of  the 
Edison  central  station  in  Milan,  Italy,  which  had  a  rating  of 
about  8,000  lamps,  a  similar  one  having  been  established  in 
New  York  which  had  a  rating  of  about  18,000  lamps.  The 
New  York  station  was  started  in  September,  1882. 

In  Fig.  4  is  shown  the  old  Edison  Machine  Works,  the  old 
Aetna  Iron  Works,  in  which  John  Roach,  the  great  American 
shipbuilder,  made  his  success  as  a  manufacturer.  About  my 
first  experience,  when  as  a  boy  I  came  to  this  country  in  1881, 
was  on  a  March  morning,  when  I  went  with  Mr.  Edison,  with 
whom  I  was  serving  at  that  time,  and  listened  to  his  negotia- 
tions with  John  Roach  for  the  leasing  of  the  building  for  the 
Edison  Machine  Works,  which  was  afterward  succeeded  by  the 
large  establishment  at  Schenectady,  now  known  as  the  Schen- 
ectady  works  of  the  General  Electric  Company. 

Some  of  the  early  specimens  of  Edison  incandescent  lamps 
are  depicted  in  Fig.  5.  They  are  lamps  that  were  made  about 
1881  and  1882.  In  looking  over  some  of  the  old  pamphlets 
descriptive  of  the  apparatus  of  that  period  we  find  the  system 
of  incandescent  electric  lighting  recommended  for  these  reasons: 

"Because  it  is  safest. 

"Because  the  lamp  when  burning  can  be  broken  into  the 
finest  shavings  of  any  description  without  causing  any  fire. 

"  It  is  the  cheapest  because  there  is  no  loss  through  imperfect 
combustion  or  defective  burners,  as  in  the  case  of  gas. 

"And  it  is  best  because  it  is  simple  in  its  application,  can 
be  turned  on  and  off  at  will,  and  does  not  require  the  use  of 
matches." 

Fig.  6  represents  one  of  the  early  electric-lighting  fixtures. 

The  old  Edison  dynamo,  a  type  of  machine  that  was  made 
in  the  years  1881  and  1882,  is  shown  in  Fig.  7.  It  was  thought 
to  have  enormous  capacity.  It  was  possible  to  get  enough 
current  out  of  a  machine  of  that  type  to  light,  I  think,  sixty 
16-candlepower  lamps! 


Fig.  4.     Edison  Machine  Works  in  New 
York  in  1881 


Fig.  5.      Edison  Incandes- 
cent Lamp  of  1882 


Fig.    1.     Edison    Laboratory   at    Menlo 
Park  in  1880 


Fig.    6.      Early    Type    of 
Fixture 


Fig.    2.     Edison   Headquarters 
Fig.  3.     Early  Edison  Central  Sta-  at   65    Fifth    Avenue,    New 

tion  in  Milan,  Italy  York,  in  1881 


Fig.  7.     Edison  Dynamo  of  1881 
and  1882 


Fig.  10.     Edison  Dynamo  of 
about  1885 


Fig.  9.     Interior  of  Pearl  Street  Station,  New  York,  of 
1882,  showing  "Jumbo"  Dynamos 


Fig.  8.    Exterior  and  Interior  Views  of  the  Appleton  (Wisconsin)  Cen- 
tral Station  of  1882,  the  First  in  the  World 


ANNIVERSARY  CELEBRATION  319 

The  first  Edison  station,  which  was  established  in  Appleton, 
Wisconsin,  and  originally  had  a  rating  of  about  250  incandescent 
lamps,  is  illustrated  in  Fig.  8.  This  station  was  started  April 
20,  1882.  Usually  the  New  York  (Pearl  Street)  Edison  station 
is  given  credit  as  the  first  central-station  distribution  system 
and  plant  started  in  this  country,  but  as  a  matter  of  fact,  while 
the  New  York  Edison  Company  station  was  designed  and  the 
construction  of  it  started  at  an  earlier  date  than  the  Appleton 
station,  the  latter  should  be  given  the  credit  of  being  the  first 
commercial  central  station  established  anywhere  in  the  world 
for  the  generation  and  distribution  of  electrical  energy  on  a 
multiple-arc  system.  I  do  not  believe  that  it  is  still  in  opera- 
tion, it  having  been  replaced  by  a  more  modern  edifice  and 
equipment. 

An  interior  view  of  the  first  station  in  New  York,  known  as 
the  Pearl  Street  station,  is  found  in  Fig.  9.  This  plant  was 
built  in  what  was  known  as  "The  Swamp"  district  of  New  York. 
The  boilers  were  down  below  and  the  dynamos  and  engines 
were  carried  above,  being  shown  in  the  picture.  The  station 
naturally  went  out  of  existence  years  ago;  but  from  an  en- 
gineering point  of  view  it  will  interest  many  of  the  engineers 
here  as  showing  Mr.  Edison's  conception  that  what  was  nec- 
essary for  central-station  work  was  dynamo-electric  machines 
directly  connected  to  the  shaft  of  the  engine.  The  two  engines 
shown  ran  at  a  speed  of  about  350  revolutions  a  minute,  I 
believe. 

Fig.  10  shows  another  type  of  bipolar  Edison  machine  which 
was  used  in  the  early  eighties.  It  represents  the  development 
of  the  small  machine  of  Fig.  7  to  a  machine  of  a  larger  type. 
I  believe  that  machine  (Fig.  10)  had  the  remarkable  capacity 
of  250  16-candlepower  lamps! 

We  come  now  to  1887.  Fig.  11  gives  a  front  view  of  the 
old  Edison  building,  known  then  as  139  Adams  Street,  the  same 
site  that  we  now  occupy  as  our  offices.1  In  Fig.  12  is  shown  the 

1.  The  building  illustrated  in  Fig.  11  was  remodeled  about  twenty  years 
ago  and  is  the  present  (1915)  120  West  Adams  Street.  The  "Edison  Building" 
of  today,  one  of  the  large  office  buildings  of  the  city,  is  known  as  72  West  Adams 
Street. 


320  ADDRESSES  OF  SAMUEL  INSULL 

engine  room  of  the  old  Chicago  Edison  station.  It  was  on  the 
ground  floor,  or,  rather,  in  a  kind  of  half-basement.  High- 
speed engines  were  belted  to  dynamos  on  the  floor  above. 
A  view  in  the  dynamo  room  is  given  in  Fig.  13. 

It  was  on  August  6, 1888,  that  the  Adams  Street  station  was 
first  operated  on  the  system,  and  it  was  shut  down  permanently 
on  August  19,  1894.  The  original  equipment  consisted  of  four 
200-horsepower  Armington  &  Sims  engines,  each  driving  two 
No.  32  Edison  bipolar  dynamos,  with  a  rating  of  about  80 
kilowatts  each,  or  say  somewhere  around  600  to  800  horse- 
power. Some  detail  of  the  Edison  switchboard  in  the  Adams 
Street  station  is  given  in  Fig.  14.  It  should  be  interesting  to 
anyone  connected  with  our  switchboard  department  today. 

Fig.  15  is  that  of  the  exterior  of  the  Harrison  Street  station, 
Chicago.  That  station,  in  the  early  nineties,  was  probably  one 
of  the  most  celebrated  stations  for  producing  electrical  energy 
in  this  country.  The  interior  of  the  Harrison  Street  station 
is  shown  in  Fig.  16.  It  is  significant  of  the  great  growth  of 
this  industry  that  the  entire  rating  of  that  station  is  less  than 
the  rating  of  one  of  the  turbo-generator  units  that  we  order 
for  our  central  stations  in  this  present  year.  A  view  of  our 
switchboard  in  the  basement  at  Adams  Street  is  given  in 
Fig.  17.  This  switchboard  is  still  in  use. 

Fig.  18  is  a  view  of  our  Twenty-seventh  Street  station. 
After  the  establishment  of  the  Adams  Street  station  and 
before  my  connection  with  the  company  a  small  district  was 
started  down  on  the  South  Side  and  the  energy  produced  locally 
at  No.  2700  Wabash  Avenue.  At  the  present  time  this  old 
station  is  used  as  a  substation.  Soon  after  I  took  charge  of 
the  property  we  built  a  station  on  North  Clark  Street  by  the 
side  of  the  Newberry  Library  building  (Fig.  19).  These  small 
stations  give  you  an  idea  of  the  small  things  that  we  were 
satisfied  with  twenty  years  ago.  Fig.  20  is  a  view  of  the 
interior  of  the  North  Clark  Street  station  which  was  the  first 
station  that  we  built  having  vertical  engines  with  direct- 
connected  generators. 

Particularly  interesting  is   Fig.  21,  which  represents  our 


Fig.  11.     Original  Edison  Building,  Adams  Street,  Chicago 


Fig.  14.  Original  Throe-wire  Switchboard  in  Adams  Street  Station,  Chicago 


Fig.  13.     Dynamo  Room  at  Adams  Street,  Chicago,  Station  of  1888-1894 


Fig.  12.     Engine  Room  of  Adams  Street,  Chicago,  Station  of  1888-1894 


Fig.  15.     Harrison  Street  Station,  Chicago,  Built  in  1892 


Interior  of  Harrison  Street  Station,  Chicago 


ANNIVERSARY  CELEBRATION  321 

first  rotary  converters.  We  put  them  into  use  at  our  Twenty- 
seventh  Street  station  on  October  15,  1897.  These  pieces  of 
apparatus  are  of  interest,  not  only  to  those  connected  with 
the  Commonwealth  Edison  Company,  but  to  the  industry 
throughout  this  country  and  practically  throughout  the  world, 
as  I  believe  they  represent  one  of  the  first  attempts,  if  not  the 
first,  at  massing  the  production  of  energy  where  it  could  be 
manufactured  cheaply  in  large  quantities,  and  its  distribution 
made  to  distant  points  where  the  electricity  could  be  converted 
to  whatever  pressure  was  necessary  to  enable  it  to  be  used  in  our 
service  from  house  to  house. 

A  view  of  our  first  storage  battery,  started  in  May,  1898,  is 
presented  in  Fig.  22  (facing  page  331). 

Fig.  23  represents  the  growth  of  our  business  from  1888  to 
1900.  Each  one  of  those  lines  across  the  sheet  represents  a 
year.  You  will  notice  that  our  progress  was  quite  steady  from 
year  to  year. 

The  original  steam  turbine  and  generator  that  we  installed 
in  the  Fisk  Street  station  is  shown  in  Fig.  24.  The  Fisk  Street 
station  started  operating  on  October  2,  1903.  There  are  now 
ten  turbines  in  Fisk  Street  station,  each  having  a  rating  of 
12,000  kilowatts,  or,  say,  18,000  horse-power,  a  total  of  180,000 
horse-power.1  To  give  you  an  idea  of  the  magnitude  of  power 
production  in  that  station,  I  can  tell  you  that  four  of  those 
turbines  would  be  about  equal  to  the  capacity  of  the  steamships 
Lusitania  or  Mauretania. 

Our  Quarry  Street  station,  opposite  Fisk  Street,  has  a  rating 
of  84,000  kilowatts,  or  perhaps  120,000  horse-power. 

An  architect's  drawing  of  our  new  Northwest  Station  (at 
North  California  Avenue  and  Roscoe  Street)  is  reproduced 
in  Fig.  25.  When  it  was  drawn  it  was  assumed  that  we  would 
have  twin  stations  there.  The  plant  we  are  building  there  now 
is  at  the  left  hand  of  the  picture,  and  will  have  a  rating  of  about 
120,000  kilowatts.  If  we  ever  build  the  second  station,  the 

1.  Since  the  completion  of  the  addition  to  Fisk  Street  station  in  1914, 
the  number  of  generating  units  in  that  station  is  twelve  and  the  total  rating 
in  kilowatts  is  165,000. 


322 


ADDRESSES  OF  SAMUEL  INSULL 


combined  rating  there  will  be  about  240,000  kilowatts  or,  say, 
about  360,000  horse-power. 

The  diagrammatic  drawing  of  Fig.  26  indicates  the  relative 
size  of  our  generating  units  from  the  time  of  the  starting  of  the 


23.    Growth  of  Central-Station  Business  in  Chicago 
(Composite  Ampere  Curves)  from  1888  to  1900 

Chicago  Edison  Company  up  to  date.  You  see  that  the  first 
one  is  about  160  kilowatts,  the  second  one  3,500  kilowatts,  and 
the  third  one  20,000  kilowatts.1  The  black  columns  indicate 
the  relative  rating  of  the  units. 

The  curves  in  Fig.  27  give  the  yearly  maximum  kilowatt 

1.  Units  of  525,000  and  30,000  kilowatts  have  been  added  to  Fisk  and 
Northwest  stations  since  these  words  were  spoken. 


ANNIVERSARY  CELEBRATION 


Fig.  26.     Relative  Size  and  Output  of  Generating  Units  in  Chicago 


260.000 
240,000 
220,000 
200,000 
180,000 
160.000 
1-W.OOO 
'120,000 
100,000 


YEARLY 

IM  KILOWATTS 


240.000 
220.000 


llllllllllllllllllllllil 


Fig.  27.    Annual  Maximum-Kilowatt  Output  in  Chicago 
up  to  1912 


324  ADDRESSES  OF  SAMUEL  INSULL 

output  of  the  company  and  show  the  growth  over  a  period 
of  years. 

STATISTICAL  DATA 

Here  are  some  decidedly  technical  curves  —  the  annual 
load  factors  of  the  Commonwealth  Edison  Company.1  The 
line  marked  "total"  is  practically  the  index  of  our  ability  to 
earn  a  greater  or  smaller  amount  of  money  on  each  dollar 
invested  in  our  business.  You  will  see  where  it  starts  in  1902 
and  goes  gradually  up  until  1908,  when  it  took  a  drop;  but  it  is 
now  higher  than  ever.  Our  load  factor  at  the  present  time  is 
between  40  and  50  per  cent.  In  1900  it  was  less  than  30  per 
cent.  That  means  that  our  investment  is  employed  50  per 
cent  longer  at  the  present  time  than  it  was  employed  in  1900. 
The  result  of  that  is  that  we  can  either  earn  more  money  on 
the  dollar  invested  or  else  sell  our  product  at  a  lower  price  to  our 
customers.  We  take  the  middle  course  and  try  and  earn  a 
little  more  money  on  the  dollar  invested  and  sell  our  product 
at  a  much  lower  price  to  our  customers. 

Fig.  28  shows  the  total  output  of  the  company  from  about 
the  latest  date  of  Fig.  23  up  to  1911,  showing  the  remarkable 
growth,  year  by  year,  governed  somewhat  by  general  business 
conditions.  I  draw  your  attention  especially  to  the  growth  from 
1909  to  1910.  General  business  began  to  drop  off  a  little,  so 
the  growth  between  1910  and  1911  has  not  been  quite  so  great; 
still  it  has  kept  up  at  a  pretty  good  rate. 

Conservation  of  fuel  is  important.  As  our  output  has  gone 
up  and  as  we  have  been  able  to  buy  apparatus  of  a  more  econom- 
ical character,  our  coal  consumption  has  gone  down.  The 
saving  in  the  consumption  of  coal  per  unit  of  output  in  the  ten 
years  from  1901  to  1911  is  equivalent  to  a  saving  for  the  year 
1911  of  1,504,000  tons,  or  37,500  carloads  of  coal  a  year,  or 
three  trainloads  of  37  cars  each  every  day.  The  importance  of 
that  side  of  our  business  and  the  possibilities  of  what  can 

1.  The  reference  here  is  to  the  diagram  given  as  Fig.  9  of  the  chapter  on 
The  Relation  of  Central-Station  Generation  to  Railroad    Electrification." 
See  page  272. 


ANNIVERSARY  CELEBRATION 


325 


probably  be  accomplished,  as  the  use  of  electrical  energy  ex- 
tends and  the  uneconomical  consumption  of  fuel  ceases,  has 


Fig.  28.     Total-Output  Curves  (in  Kilowatts)  for  Chicago, 
1898-1911 

been  well  shown  in  the  addresses  of  Mr.  de  Ferranti,  president 
of  the  (British)  Institution  of  Electrical  Engineers. 

Fig.  29  shows  the  lighting  rates  per  kilowatt-hour  for  one, 
two,  three  and  four  hours'  use  per  day;  also  kilowatts  connected. 


326  ADDRESSES  OF  SAMUEL  INSULL 

In  Fig.  30  is  indicated  the  amount  of  light  that  one  dollar  will 
buy.1  One  dollar  now  buys  almost  nine  times  as  much  electric 
light  as  it  did  in  1886,  and  more  than  twice  as  much  as  it  did  in 
1907,  only  five  years  ago.  The  cost  of  electricity  for  two  hours' 
use  a  day  has  decreased  69  per  cent.  Fig.  31  illustrates  an 


'92    '94    '86    '981900  '02    '04   '06    '08    '10   '12 


Fig.  29.    Lighting  Rates  for  Various  Hours  of  Use  Daily 
(Chicago,  1912) 

electric-light  bill  in  1892  and  one  in  1912,  a  difference  of  twenty 
years.  The  1892  bill  was  dated  November  5, 1892,  and  amounts 
to  $64.98  net,  or  an  average  of  19  cents  per  kilowatt-hour.  The 
1912  bill  is  based  on  the  same  kilowatt-hours  but  figured  at 
our  present  rates,  and  amounts  to  $19.95  net  or  5.8  cents  per 
kilowatt-hour. 

It  is  rather  interesting  to  note  the  amount  of  money  that 
we  contribute  for  public  purposes  (Fig.  32).  In  1889  we  con- 
tributed $6,000;  in  1899  we  contributed  $27,700,  and  in  1911  we 
contributed  $1,057,500  to  the  city  in  the  form  of  taxes  and 
municipal  compensation.  This  diagram  (Fig.  33)  gives  the 
information  with  relation  to  fuel.  In  1889  we  spent  $8,860  for 
fuel;  in  1899  we  spent  $159,600,  and  in  1911  we  spent  $1,591,100. 

1.  The  idea  illustrated  by  the  chart  of  Fig.  30  is  set  forth  in  a  different 
manner  by  Fig.  4  of  the  chapter  on  "Electrical  Securities,"  page  431. 


ANNIVERSARY  CELEBRATION 

THE    COST   OF    ELECTRICITY    FOR    TWO    HOURS 'USE 

PER    DAY     HAS     DECREASED     OVER    69% 

THE    EFFICIENCY    OF    THE 

INCANDESCENT     LAMP 

HAS    INCREASED 

OVER    26O%.  TUNGSTEN 

RATES 

isc  »NO  ec 


327 


RATES       'BC  AND    IOC 


CARBON  *>CANO.OC    ^~^ 

-0-  $  V 


1886  IN  1898  I"  19C5   IN  1906 


ONE  DOLLAR  NOW  BUYS  ALMOST  NINE  TIMES  AS  MUCH 
ELECTRIC  LIGHT  AS  IT  DID  IN  1856,  TWICE  AS  MUCH  AS  IT  DID  IN 
1907.  JUST  FIVE  YEARS  AGO. 

Fig.  30.     A  Chart  of  1912,  Showing  Relative  Amount  of  Electric  Light 
One  Dollar  Would  Buy 


ELECTRIC  CURRENT: 


The  Chicago  Edison  Company,  or 


COMMONWEALTH  EC 


mrrrm:!!  &  smostuur, 

892  STATt  ST. 


m 


HnmiR   4   EHUMSMAJI. 
SBS  STATB  ST. 


Fig.  31.     Bills  of  1892  and  1912  for  the  Same  Amount  of  Energy, 
Showing  Decrease  in  Price 


328  ADDRESSES  OF  SAMUEL  INSULL 


Fig.  32.    Annual  Payments  for  Fig.  33.     Yearly  Cost  of  Fuel 

Taxes 


Fig.  34.     Total  Amount 
Invested  in  Plants 


Fig.  35.     Income  from  Sales  Fig.  36.    Number  of  Customers 

of  Electricity 

Graphical  Representation  of  Chicago  Central-Station  Growth 


ANNIVERSARY  CELEBRATION 


329 


Fig.  37.  Distribution  of  Earnings 
of  Commonwealth  Edison  Com- 
pany for  Fifteen  Months  Ended 
December  31,  1911 


Fig.  34  shows  the  striking  increase  in  our  investment.  In  1889 
we  had  $797,200  invested  in  plant.  That  means  in  generating 
stations  and  distribution  system. 
In  1899  we  had  $17,461,000  in- 
vested, and  in  1911  we  had  the 
imposing  sum  of  $69,896,000  in- 
vested. 

In  1889  our  income  from 
sales  of  electricity  was  $105,700; 
in  1899  $1,792,700,  and  in  1911 
$13,902,300.  (See  Fig.  35.)  In 
1893,  as  shown  in  Fig.  36,  we 
had  4,100  customers;  in  1899  we 
had  13,300,  and  in  1911  we  had 
157,115. 

Fig.  37  gives  the  distribution 
of  our  earnings  for  the  fifteen 
months  ended  December  31,  1910.  Our  payroll  amounted  to 
$3,651,100,  or  a  little  over  19  per  cent  of  our  receipts.  Other 
operating  expenses  are  as  shown,  including  fuel  amounting  to 
$1,996,600,  or  a  little  over  10  per  cent  of  our  receipts.  Our 
taxes  and  municipal  compensation  amounted  to  $1,316,700, 
which  is  about  7  per  cent  of  our  receipts.  Our  insurance 
amounted  to  $259,000,  about  1.5  per  cent  of  our  receipts. 

Our  depreciation  and  surplus  are 
shown  in  the  diagram,  while 
our  dividends  and  bond  interest 
amounted  to  $4,632,000,  or  about 
24  per  cent  of  our  receipts. 

As  shown  by  Fig.  38  the 
gross  income  of  all  the  public- 
service  companies  in  Chicago 
amounts  to  $82,273,600,  of  which 
the  Commonwealth  Edison  Com- 
pany represents  $15,331,200; 

,-,.  „       ,  almost  as  much  as  the  gas  com- 

Fig.  38.    Gross  Income  of  Chicago 
Public-Service  Companies  in  1911     pany,    a    little    more   than    the 


330  ADDRESSES  OF  SAMUEL  INSULL 

telephone  company,  and  not  quite  half  as  much  as  the  sur- 
face and  the  elevated  roads  put  together. 

Of  the  total  amount  of  electric-service  business  now  possible 
in  this  community,  we  are  at  present  supplying  only  about  one- 
third,  or  a  little  more  than  one-third,  possibly  35  per  cent.  It 
takes  in  round  numbers  about  $75,000,000  to  operate  our 
business  at  the  present  time.  If  we  were  to  get  all  of  the  busi- 
ness possible  to  be  obtained  —  that  is,  if  everybody  had  the 
same  ideas  as  we  have  as  to  the  economy  of  producing  and 
distributing  energy  electrically  —  it  would  in  my  judgment 
take  nearer  $250,000,000  to  operate  the  business  of  manu- 
facturing and  distributing  energy  within  the  city  of  Chicago. 

Fig.  39  is  a  reproduction  of  a  photograph1  of  an  old  relic 
that  is  really  very  close  to  my  heart.  It  is  the  second  Edison 
electric  locomotive  ever  built.  It  was  built  and  operated 
successfully  in  1882  at  Menlo  Park,  New  Jersey,  over  a  track 
not  unlike  the  ordinary  railroad  track  that  you  see  anywhere 
in  this  part  of  the  country,  except  that  the  ties  were  a  little 
higher  above  the  ground  than  is  usual  in  railroad  construction. 
The  system  of  operating  it  is  about  the  same  as  that  em- 
ployed today  on  the  New  York  Central  and  Pennsylvania  roads, 
except  that  instead  of  having  a  third  rail  the  two  rails  operated 
as  the  two  conductors  of  the  circuit.  The  road  was  about  two 
miles  long  and  was  operated  experimentally  during  the  whole  of 
one  year.  It  was  built  purely  as  an  experiment,  and  I  think 
was  possibly  the  first  experimental  electric  railway  of  any 
length  built  in  this  country  and  probably  the  second  or  third 
built  anywhere  in  the  world.  A  modern  electric  locomotive  — 
one  of  our  own  —  is  shown  in  Fig.  40. 

This  chart2  is  a  comparison  of  Chicago  and  New  York 
central-station  load  diagrams  for  the  maximum  day  of  the 
year.  I  think  I  may  say  that  this  diagram  represents  the 

1.  The  man  standing  on  the  front  platform  of  the  car  attached  to  the 
locomotive  is  Samuel  Insull,  then  twenty-two  years  old.     This  is  one  of  the 
few  photographs  of  the  author  of  these  addresses  of  which  publication  has  been 
authorized. 

2.  See  Fig.  14  of  chapter  on  "The  Relation  of  Central-Station  Generation 
to  Railroad  Electrification,"  page  280. 


Fig.  39.     Edison  Electric  Railway,  Menlo  Park,  1882 


Fig.  40.     Electric  Locomotive  of  1912  at  Northwest  Station,  Chicago 


ANNIVERSARY  CELEBRATION  331 

difference  in  the  policy  of  the  New  York  companies  as  compared 
with  the  Chicago  companies  during  the  last  ten  years.  The 
Commonwealth  Edison  Company's  load  factor  represents 
exactly  our  earning  capacity  on  our  investment.  Our  load 
factor  in  1902  (maximum  day)  was  42.3  per  cent;  in  1912  the 
corresponding  figure  was  55.7  per  cent.  That  means  that  in 
1912  we  used  our  investment  about  13  per  cent  longer.  And 
yet  the  New  York  Edison  Company  was  only  able  to  employ 
its  investment  about  5  per  cent  more  in  1911  than  we  did  in 
1902.  I  do  not  know  of  anything  that  shows  more  clearly  the 
difference  in  the  character  of  the  business  done  by  the  two  con- 
cerns than  that  particular  curve. 

WHAT  THE  SERVICE  MEANS 

Some  of  the  financial  figures  of  our  business  are  remarkable. 
Take  those  figures  that  I  showed  you  in  Fig.  33.  They  in- 
dicate that  the  quantity  of  coal  consumed  per  year  is  upwards  of 
one  million  tons;  per  day  upwards  of  2,800  tons;  and  upwards 
of  120  tons  of  coal  an  hour.  There  were  some  hours  during  the 
winter  when  probably  250  tons  of  coal  had  to  be  passed  over  our 
grate  bars.  At  a  time  of  threatened  strike  in  coal-mining 
regions  —  not  when  the  strike  is  actually  taking  place,  but 
months  before  —  this  company  in  order  to  protect  the  interests 
of  its  customers  has  to  accumulate  large  reserves  of  coal, 
300,000  or  400,000  tons.  The  incurring  of  such  expense  makes 
the  apprehension  about  as  serious  as  the  strike  itself  would  be. 
I  presume  that  in  the  last  few  months,  prior  to  April  1,  the 
storage  of  coal  above  the  ordinary  outlay  for  fuel  will  have 
amounted  to  upwards  of  $300,000.  Now,  we  have  to  do  a 
thing  like  that  from  two  points  of  view  —  our  duty  to  our 
customers  and  our  duty  to  ourselves.  The  steam-railroad 
trains  can  stop  and  stay  at  one  point  all  winter,  if  necessary, 
due  to  accumulations  of  snow,  a  strike  of  their  employees,  or 
whatever  unfavorable  conditions  Providence  or  man  may  bring 
about,  and  it  is  forgotten  in  a  day.  But  just  imagine  what 
would  happen  to  a  community  like  Chicago  if  our  service 


332  ADDRESSES  OF  SAMUEL  INSULL 

stopped!  The  wheels  of  industry  would  cease.  The  majority 
of  the  newspapers  would  cease  to  be  printed.  The  Postoffice 
and  the  Federal  courts  would  have  to  shut  down.  In  fact, 
most  of  those  things  which  contribute  to  the  comfort  of  mod- 
ern civilization  would  have  to  come  to  a  standstill. 

We  pay  the  city  of  Chicago,  as  I  have  stated,  $1,058,000 
annually  for  taxes  and  municipal  compensation.  That  amounts 
to  $2,800  a  day,  $120  an  hour,  just  about  $2  a  minute.  And 
yet  we  are  not  good  citizens! 

The  $75,000,000  necessary  to  handle  a  business  such  as 
ours  —  and  I  might  say  in  passing  that  I  do  not  know  any- 
where in  the  world  where  it  would  be  possible  to  duplicate  the 
business  we  have  and  the  plants  we  have  for  $75,000,000  — 
costs  $4,500,000  a  year  for  interest  at  6  per  cent.  It  costs 
$12,300  per  day,  or  $510  an  hour,  or  not  very  far  from  $10  a 
minute.  To  you  young  men  who  have  not  been  dealing  with 
the  problem  of  how  to  overcome  interest  quite  as  many  years 
as  I  have,  I  will  say  that  during  all  the  time  you  waste  in  the 
service,  when  you  ought  to  be  at  work,  you  are  wasting  a  very 
considerable  portion  of  the  interest  on  the  amount  of  money 
necessary  to  run  this  business.  That  waste,  I  may  say  also  in 
passing,  is  of  far  more  serious  consequence  to  you  than  it  is  to 
us,  because  you  can  get  far  more  benefit  out  of  close  attention 
to  your  business  than  we  can  get  out  of  you  if  you  do  pay  close 
attention  to  your  business. 

The  Commonwealth  Edison  Company  consumes  at  the 
present  time  10  per  cent  of  the  soft  coal  consumed  in  the  city 
of  Chicago.  I  mention  that  to  show  you  what  the  possibilities 
of  the  future  are,  if  the  day  should  ever  come  when  electrical 
energy  can  be  produced  so  cheaply,  and  when  the  means  of  con- 
version into  heat  become  so  cheap,  that  we  can  use  electricity 
for  heating  purposes.  The  possibilities  before  us  are  some- 
thing enormous,  so  far  as  the  future  of  the  business  is  concerned. 

Here  is  a  rather  interesting  point.  The  amount  of  energy 
produced  by  us  in  1911  was  greater  than  the  entire  amount 
produced  by  the  public  energy-producing  companies  of  New 
York,  Brooklyn  and  Boston,  which  produce  energy  for  sale; 


ANNIVERSARY  CELEBRATION  333 

that  is,  greater  than  the  entire  amount  produced  by  the  New 
York  Edison  Company,  the  Brooklyn  Edison  Company  and 
the  Edison  Electric  Illuminating  Company  of  Boston  put 
together.  We  produced  716,000,000  units  (kilowatt-hours) 
and  they  produced,  among  them,  692,000,000  units. 

LESSONS  FROM  THE  CAREER  OF  EDISON 

I  would  a  great  deal  rather,  on  an  occasion  of  this  kind, 
talk  to  my  own  people  about  things  that  are  probably  of  closer 
personal  interest  to  them,  and  which  give  me  a  far  greater 
pleasure  to  talk  to  them  about,  than  deal  with  the  historical 
part  of  our  business,  as  I  have  felt  it  necessary  to  do  here  to- 
night. Before  I  sit  down  I  want  to  talk  to  the  Commonwealth 
Edison  fellows  here.  I  want  to  talk  to  you  as  I  try  to  talk  to 
you  whenever  it  is  my  privilege  to  come  before  you. 

Take  the  picture  that  I  started  with  here  this  evening,  the 
picture  of  my  old  chief,  Mr.  Thomas  A.  Edison,  one  of  the 
greatest  minds  of  our  age.  The  only  advantage  that  he  had 
when  he  started  life  was  the  fact  that  he  came  from  fine  old 
Scotch-Holland  stock  and  came  from  that  "Western  Reserve" 
which  has  produced  so  many  great  men  in  this  country.1 
Probably  the  greatest  advantage  he  had,  above  even  the 
marvelous  intellect  that  God  endowed  him  with,  was  the  fact 
that  he  had  a  mother  who  gave  him  courage  to  overcome  the 
obstacles  that  he  must  meet.  Just  consider  what  that  man  has 
accomplished.  He  is  the  inventor  of  our  industry.  You  can- 
not install  a  system,  whether  it  is  as  small  as  the  little  system 
that  was  started  in  1882  at  Appleton,  Wisconsin,  or  as  great 
as  the  great  system  that  we  are  operating  here  in  and  around 
Chicago  today  —  you  cannot  in  fact  install  any  system  for  the 
distribution  of  electrical  energy  —  without  using  the  inventions 
of  Thomas  A.  Edison.  His  patents  may  have  expired;  but 
still  to  this  day  you  have  got  to  use  the  same  engineering  meth- 
ods that  he  devised  and  that  he  described  in  his  early  distri- 
bution patents. 

1.  Edison  was  born  in  Milan,  Ohio,  in  1847. 


334  ADDRESSES  OF  SAMUEL  INSULL 

Now,  he  had  far  less  opportunity  than  the  average  young 
man  who  enters  our  service.  I  am  not  talking  now  about  his 
brains  or  his  capacity  for  inventive  work,  but  I  am  talking  sim- 
ply about  his  opportunities.  I  remember  traveling  with  him 
from  Detroit  to  Port  Huron,  Michigan,  some  thirty  years  ago, 
and  hearing  him  tell  the  story  of  the  days  when  he  was  the 
"peanut  boy"  on  the  very  train  that  we  were  traveling  on,  and 
of  what  he  went  through  to  learn,  step  by  step,  the  things  that 
enabled  him  to  take  advantage  of  the  marvelous  intellect  that 
he  had  been  endowed  with. 

Never  do  I  think  of  the  work  Edison  has  accomplished  with- 
out trying  to  recall  to  my  mind  the  possibilities  and  the  ad- 
vantages that  the  men  of  today  have  as  compared  with  his 
situation  as  a  boy  of  from  twelve  to  fifteen,  without  education, 
sitting  up  nights  in  a  little  wayside  station,  learning  to  tele- 
graph. Later,  landing  in  Boston  in  the  dead  of  winter,  having 
so  little  financial  resources  that,  according  to  the  story  I  have 
heard  told  frequently,  he  walked  into  the  telegraph  office  in 
zero  weather  with  a  linen  duster  on;  having  so  little  idea  as  to 
the  methods  to  be  adopted  in  educating  himself  that  he  went 
into  the  Boston  Public  Library  and  started  on  a  row  of  books 
intending  to  read  the  whole  library  so  he  should  be  dead  sure  to 
get  everything  there  was  there. 

When  I  remember  what  he  went  through  in  his  early  days 
and  how  he  kept  at  work,  when  I  remember  his  "sticktoitive- 
ness,"  his  desire  to  "get  there,"  I  wonder  at  the  men  around 
me  that  they  do  not  take  more  into  their  hearts  the  example  of 
that  man  who  stands  at  the  head  of  our  industry  and  try  to 
emulate  some  of  his  efforts.  I  do  not  mean  to  say  that  you 
can  all  be  Edisons;  I  do  not  mean  to  say  that  you  can  all  startle 
the  world  with  some  great  discovery  in  mechanics  or  electricity; 
but  you  can  all  do  the  work  that  is  before  you  and  do  it  to  the 
best  of  your  ability. 

DEVELOPING  THE  ORGANIZATION  BY  ITS  OWN  BRAINS 
Bear  this  in  mind,  that  the  man  who  only  does  what  he  is 
paid  for  never  gets  paid  very  much  beyond  just  what  he  is 


ANNIVERSARY  CELEBRATION  335 

entitled  to,  his  daily  wage.  We  are  engaged  in  a  business  that 
has  been  operating  now  something  like  three  decades  —  I 
mean  from  the  time  of  the  birth  of  the  incandescent  lighting 
business  —  operating  in  this  city  something  like  a  quarter  of  a 
century.  The  developments  of  the  last  few  years  demonstrate 
that  the  economical  way  of  doing  this  business  is  to  mass  the 
production  of  electrical  energy  and  distribute  it  over  wide  areas. 
This  means  the  employment  in  great  organizations  of  an 
enormous  amount  of  capital,  and  capital  is  ever  ready  to  pay 
for  brains.  I  say  again,  therefore,  that  great  opportunities 
are  before  you  in  the  business  in  which  we  are  engaged.  It 
rests  with  you  whether  you  will  take  advantage  of  them. 

You  may  think  that  I  am  preaching  the  same  story  that  I 
preach  every  time  I  have  a  chance  to  talk  to  you.  Perhaps 
that  is  so.  I  think  the  chances  are  that  I  shall  continue  to 
preach  just  the  same  story  year  after  year.  There  is  nothing 
that  I  like  to  see  so  much  as  the  progress  of  my  own  people; 
it  does  not  matter  whether  it  is  in  my  own  personal  office  or 
whether  it  is  in  the  organization.  There  is  one  thing  in  my 
twenty  years  of  managing  this  business  that  I  am  more  proud  of 
than  of  anything  else,  and  that  is  that  I  have  been  able  to  de- 
velop it  with  the  assistance  of  the  brains  within  the  business. 
I  do  not  know  of  any  case  where  a  man  of  considerable  position 
has  come  into  our  office  from  the  outside.  You  have  simply  to 
go  over  the  list  of  our  officers,  of  our  engineers,  and  take  the 
people  who  may  be  considered  as  on  my  own  personal  staff. 
Take  Mr.  Ferguson,  who  used  to  be  at  the  head  of  the  testing 
gang  on  the  street,  testing  tubes;  take  Mr.  Gilchrist,  who, 
according  to  my  impression,  was  Mr.  Church's  office  boy;  take 
Mr.  Fox,  who  used  to  be  my  stenographer;  take  Mr.  Gulick, 
who  was  the  bookkeeper  in  one  of  the  small  companies  we  took 
in  from  the  South  Side;  take  Mr.  Sargent,  who  was  the  first 
engineer  of  the  Chicago  Edison  Company  and  who  today  is  the 
most  distinguished  designer  of  central  stations  in  the  world. 
Take  all  of  them;  take  myself;  we  have  all  started  the  same  way. 
I  am  a  little  older  than  some  of  you,  and  yet  it  is  not  so  many 
years  ago  that  I  used  to  lick  stamps  in  an  office  in  London. 


336  ADDRESSES  OF  SAMUEL  INSULL 

Just  bear  in  mind  what  the  men  who  work  have  been  able  to 
do,  and  remember  that  you  have  those  same  opportunities. 
Sometimes  you  may  think  that  there  are  two  or  three  big 
fellows  ahead  of  you  and  that  they  have  got  their  jobs  by 
favoritism  and  that  you  have  been  put  in  the  background. 
You  may  be  right;  there  is  one  chance  in  a  hundred  that  you 
are  right  on  that  proposition;  but  there  are  ninety-nine  chances 
that  the  reason  you  stand  still  and  do  not  go  ahead  is  because 
there  is  something  lacking  inside  of  you. 

WHO  WILL  BE  THE  CHIEF  TWENTY-FIVE  YEARS  HENCE? 

I  make  this  confidential  and  very  personal  talk  to  you  be- 
cause I  have  no  greater  pleasure  than  to  see  those  around  us 
prosper.  We  have  all  of  us  started  the  same  way.  There  are 
very  few  men  in  Chicago  who  have  been  born  with  silver  spoons 
in  their  mouths.  Take  the  great  merchant  princes  in  this 
city;  take  so  distinguished  a  man  as  Mr.  Marshall  Field,  who 
so  recently  departed  from  among  us.  Take  men  like  Mr. 
George  M.  Pullman;  take  the  great  captains  of  industry 
throughout  this  country  today — and  they  all  started  from  little 
things. 

We  are  on  the  threshold  of  an  era  when  the  consolidation  of 
capital  for  all  classes  and  purposes  is  going  to  be  something 
enormous.  The  price  that  will  be  paid  for  brains  will  be  greater 
than  ever.  You  are  in  a  business  that  must  be  run  in  large 
units.  It  does  not  matter  whether  the  demagogue  or  the 
politician  with  some  axe  to  grind  (usually  at  the  expense  of  the 
public)  or  the  rabid  reformer,  misinformed  on  the  true  eco- 
nomics of  business  —  it  does  not  matter  if  those  people  say, 
"  We  will  have  no  monopoly !"  They  must  have  it  and  we  must 
have  it.  The  only  way  our  product  can  be  sold  cheaply  in  any 
community  is  by  the  establishment  of  enormous  organizations 
with  enormous  aggregations  of  capital  producing  energy  at  the 
lowest  possible  cost  and  distributing  it  in  the  most  economical 
way.  To  direct  these  great  enterprises  men  are  wanted. 
There  isn't  any  reason  why  this  Mississippi  Valley,  the  richest 


ANNIVERSARY  CELEBRATION  337 

part  of  the  United  States  in  productive  ability,  should  not  ob- 
tain the  greater  part  of  its  men,  for  the  management  of  the 
great  energy-producing  companies  that  must  be  established 
throughout  the  Valley  in  the  next  fifty  years,  from  the  boys  who 
are  now  entering  the  service  of  the  Commonwealth  Edison 
Company.  If  we  are  as  reasonably  successful  as  an  organiza- 
tion in  the  next  twenty  years  as  we  have  been  in  the  last  twenty 
years,  we  will  establish  such  a  reputation  that  the  mere  fact 
that  a  man  has  worked  for  us  for  any  length  of  time  will  con- 
stitute a  diploma  that  will  gain  him  respect  and  opportunity 
anywhere  in  this  western  country. 

All  I  ask  you  men  to  do  is  to  take  advantage  of  these  op- 
portunities. The  company  does  everything  it  can  for  you.  It 
does  it  because  it  thinks  it  is  good  business  policy  to  do  so. 
That  is  the  basis  on  which  it  is  done.  It  supports  this  institu- 
tion1 because  it  thinks  that  if  it  can  raise  the  average  intelligence 
of  its  employees  their  productive  ability  will  be  greater.  Now,  if 
the  productive  ability  of  its  employees  is  of  some  advantage  to  the 
company,  how  much  greater  advantage  must  it  be  to  the  men 
themselves !  The  company  does  everything  it  can  in  the  way  of 
helping  you  to  save  your  money,  putting  you  in  the  way  of 
making  money,  and  in  return  all  we  ask  you  to  do  is  to  do  all  you 
can  for  yourselves.  Incidentally,  you  will  help  us. 

Probably,  after  this  business  has  been  running  another 
twenty-five  years,  I  will  not  be  standing  here,  or  on  a  plat- 
form corresponding  to  this,  celebrating  the  half-century  birth- 
day; but  if  the  organization  fulfills  its  true  traditions  the  man 
who  then  occupies  my  present  position  will  be  someone  who  at 
the  present  time  is  just  on  the  threshold  of  entering  our  service. 

1.  Referring  to  the  Commonwealth  Edison  Company  Section  of  the 
National  Electric  Light  Association. 


SUPPLYING  THE  ENERGY  REQUIREMENTS 
OF  THE  COMMUNITY1 

PROBABLY  the  most  important  thing  in  connection  with 
the  development  of  the  supply  of  energy  in  the  com- 
munity is  the  impressive  change  that  has  taken  place 
within  a  relatively  few  years  as  to  the  size  of  the  units  used  in 
the  generation  of  electricity.  In  this  development  rests  to  a 
very  large  extent  the  solution  of  the  economic  production  and 
distribution  of  energy  in  a  community  like  Chicago  and  the 
industrial  area  surrounding  it.  If  we  still  had  the  small  units 
used  twenty  or  even  ten  years  ago,  the  cost  of  production  would 
be  such  as  to  make  impossible  the  present  low  cost  of  energy; 
and,  after  all,  whether  you  need  the  energy  for  transportation, 
for  light  or  for  industrial  purposes,  the  first  essential  is  to  get 
it  at  the  lowest  possible  cost. 

It  is  not  a  well-founded  idea,  if  the  production  of  energy 
is  centralized  under  one  organization,  that  the  electrification 
of  steam  railroads  means  the  use  of  a  very  large  amount  of 
energy. 

Owing  partly  to  differences  in  method  of  operating  and 
partly  to  the  difference  resulting  from  conditions  here  in  Chi- 
cago, we  [the  Commonwealth  Edison  Company]  are  able  to 
get  almost  a  third  more  use  out  of  our  investment  than  they 
are  able  to  in  most  of  the  other  large  cities.  By  combining 
various  forms  of  business  we  are  able  to  use  the  dollar  invested 
in  our  business  about  a  third  longer  time,  on  an  average,  than 
the  other  large  producers  of  energy  in  the  other  great  centers 

1.  On  May  23, 1912,  Mr.  Insull  gave  a  brief  address  before  the  City  Club 
of  Chicago.  It  was  the  first  of  a  series  of  addresses  planned  by  the  club  and 
relating  to  "Chicago's  Transportation  Problem."  Only  a  part  of  the  speech 
is  reproduced  here,  as  much  of  the  information  given,  as  well  as  the  charts  which 
were  used,  had  been  presented  in  previous  addresses. 

338 


COMMUNITY  REQUIREMENTS  339 

of  population  of  this  country.  That  point  has  an  important 
bearing  on  cheap  transportation.  If  the  transportation  com- 
panies produced  their  own  energy,  the  cost  of  operating,  the 
depreciation  and  the  interest  would  be  greatly  increased.  It 
is  the  combination  of  all  the  various  utilities  using  energy 
that  enables  us  to  sell  it  to  the  small  consumer  on  an  average 
cheaper  than  the  price  at  which  it  is  sold  in  any  of  the  large 
centers  of  population  on  either  side  of  the  Atlantic. 

TAXPAYERS'    MONEY   SHOULD    NOT   BE   USED   TO   FURTHER 
ECONOMIC  WASTE 

The  best  evidence  that  cheap  power  enters  into  almost 
every  man's  thoughts  is  the  way  the  politicians  play  upon 
the  proposition.  Glowing  pictures  are  drawn  of  the  amount 
of  power  than  can  be  produced  from  waterways  within  this 
state,  and  because  water  runs  down  hill  it  is  asserted  that  the 
power  can  all  be  sold  for  nothing  or  at  a  very  low  price.  Of 
course,  that  is  simply  a  dream.  I  mention  the  subject  because 
it  is  very  much  in  the  public  mind.  There  are  some  of  us  en- 
gaged in  the  energy -producing  and  kindred  businesses  who  are 
trying  to  give  this  community  the  cheapest  possible  transpor- 
tation, the  longest  possible  ride  for  a  nickel,  the  greatest  possi- 
ble amount  of  travel  from  one  part  of  the  city  to  the  other, 
with  the  least  possible  expenditure.  I  know  of  no  one  element, 
outside  of  interest  and  depreciation,  that  has  so  important  a 
bearing  on  that  subject,  as  the  question  of  the  cheap  produc- 
tion and  distribution  of  energy. 

The  only  way  that  you  can  get  cheap  production  and  dis- 
tribution of  energy  is  by  concentration,  by  monopoly.  I  care 
not  whether  I  run  the  monopoly  or  whether  somebody  else 
runs  it,  whether  the  capital  employed  is  raised  by  my  friends 
or  by  somebody  else's  friends;  but  whatever  may  be  the  source 
of  the  money  used,  the  only  economical  way  to  manufacture  and 
distribute  energy,  to  get  all  there  is  in  it  for  all  the  people,  is 
by  concentration,  by  monopoly. 

We  have  in  use  at  this  time  nearly  400,000  horse-power 


340  ADDRESSES  OF  SAMUEL  INSULL 

produced  in  the  central  stations  in  and  around  Chicago.  Eighty 
or  eighty-five  per  cent  of  that  energy  is  produced  by  one  institu- 
tion employing  private  capital.  Fifteen  to  twenty  per  cent 
is  produced  by  another  institution,  the  Sanitary  District  of 
Chicago,  employing  the  capital  of  the  taxpayers.  I  know  of 
no  greater  waste  of  money  going  on  in  this  community  in  a 
public  way  at  this  time  than  in  connection  with  that  second 
operation.  It  is  economically  wrong.  There  should  be  but  one 
producing  system,  but  one  distribution  system.  I  do  not  care 
whether  the  railroads  buy  from  me  or  whether  the  city  buys 
from  the  Sanitary  District  —  it  should  all  be  one.  You  can 
get  more  money  out  of  the  dollar  invested  if  there  is  only  one 
system. 

While  I  myself  am  a  great  believer  in  the  regulation  of 
all  public  utilities,  I  would  like  to  remind  you  of  the  results 
that  are  being  obtained  for  the  customer  and  the  stockholder 
out  of  the  production  and  distribution  of  energy  by  a  company 
whose  rates  have  never  been  regulated,1  whose  reductions  have 
always  been  made  of  its  own  free  will.  The  only  occasion  on 
which  an  attempt  was  made  at  regulation  was  during  the  Dunne 
administration.  Mayor  Dunne  vetoed  the  ordinance,  and  the 
company  put  the  reduced  rates  in  operation  the  next  day.  So 
we  have  never  been  regulated,  notwithstanding  that  we  are 
practically  a  monopoly  and  that  we  are  living  in  a  period  when 
monopolies  are  supposed  to  be  very  bad  —  that  is,  in  their 
business  principles. 

You  have  here  in  this  city  a  monopoly  that  sells  you  energy 
at  a  lower  price  than  you  can  buy  it  in  any  city  of  similar 
size  in  the  world  and  can  still  make  such  substantial  returns 
to  its  stockholders  that  its  securities  are  in  good  demand. 

I  think  that  you  gentlemen  who  take  a  great  interest  in 
the  civic  welfare  of  the  community  in  which  you  live  can  not 
do  a  better  work  than  to  do  all  that  you  possibly  can  to  insure 

1.  It  was  in  1913,  after  the  date  of  this  address,  that  the  6ve-year  read- 
justment of  electric  service  rates,  as  provided  in  the  contract  ordinance  between 
the  City  of  Chicago  and  the  Commonwealth  Edison  Company,  was  effected. 
The  State  Public  Utilities  Commission  of  Illinois  came  into  existence  on  Jan- 
uary 1,  1914. 


COMMUNITY  REQUIREMENTS  341 

the  very  lowest  cost  of  energy  to  the  producer  and  the  very 
lowest  cost  to  the  user;  and  the  way  to  do  that  is  to  have 
absolute  concentration  of  production  and  distribution,  whoever 
that  work  may  be  done  by. 


STEPPING  STONES  OF  CENTRAL-STATION 

DEVELOPMENT  THROUGH  THREE 

DECADES1 

IT  AFFORDS  me  very  great  pleasure  to  have  this  opportu- 
nity to  meet  so  many  of  the  employees  of  the  company 
over  which  my  friend  Mr.  Freeman  so  ably  presides.  The 
early  part  of  the  Victorian  Era  gave  us  steam  railroads,  gave 
us  gas  as  an  illuminant,  and  later  on  gave  us  the  electric  tele- 
graph. The  decade  in  which  our  business  first  started,  namely, 
in  the  seventies  —  that  is,  the  experimental  portion  of  our 
business  —  gave  birth  also  to  another  wonderful  development, 
the  telephone.  In  this  country  at  that  time  nothing  was 
known  of  the  electric  light,  except  through  the  work  of  Brush, 
Thomson  and  Houston  on  series  arc  lighting,  although  as 
early  as  the  winter  of  1878  Mr.  Edison  made  his  first  announce- 
ment with  reference  to  his  experiments  on  incandescent  lamps. 
This  announcement  resulted  in  a  serious  fall  in  the  price  of 
gas  shares  all  over  the  world,  owing  to  the  fact  that  the  investors 
thought  that  the  day  of  gas  illumination  had  about  ended, 
whereas,  as  a  matter  of  fact,  it  had  only  just  about  begun. 

In  the  winter  of  1880  the  first  experimental  central  station 
was  installed  at  Menlo  Park,  New  Jersey,  which  at  that  time 
was  Mr.  Edison's  home.  Fundamentally  what  he  had  there  is 
practically  what  you  have  today  in  Brooklyn,  if  you  will 
cut  out  your  altemating-current  transmission  lines,  and  your 

1.  This  instructive  and  entertaining  lecture  was  delivered  before  the 
Brooklyn  Edison  Company  Section  of  the  National  Electric  Light  Association 
on  June  26,  1912.  It  has  been  slightly  condensed  to  avoid  repetition.  How- 
ever,  Mr.  Insull  drew  on  the  rich  fund  of  his  experience  for  much  fresh  material 
and  several  newly  related  anecdotes,  and  care  has  been  taken  to  preserve  these 
contributions  to  the  history  of  the  art,  even  though,  in  doing  so,  it  is  necessary 
to  restate  basic  facts  about  which  the  incidents  are  clustered. 

342 


A  STORY  OF  THREE  DECADES  343 

substations,  with  the  exception  that  the  system  at  Menlo  Park 
was  operated  on  the  two-wire  system,  as  at  that  time  the  three- 
wire  system  had  not  been  invented.  He  had  motors  operat- 
ing his  work-shops  and  he  had  incandescent  lamps  lighting  the 
houses.  These  lamps,  it  is  true,  were  not  of  an  efficiency  of 
1.25  watts  per  candle,  as  you  have  today,  with  1000  or  1500 
hours'  life;  they  took  about  seven  watts  per  candle,  and  would 
burn  about  long  enough  to  last  while  you  were  screwing  a  lamp 
in  the  next  socket. 


SEVEN-WATT  LAMPS  THEN,  BUT  FUNDAMENTALS  HAVE  NOT 
CHANGED 

But  still  he  had  there  all  the  fundamentals  of  a  central- 
station  system.  The  conductors  were  underground  —  a  thing 
that  at  that  time,  and  to  my  knowledge  for  two  or  three  years 
later,  was  considered  absolutely  impossible  by  almost  everyone. 
That  is,  I  do  not  think  there  was  an  electrical  man  on  either 
side  of  the  Atlantic,  except  Edison,  who  thought  it  possible 
to  insulate  copper  so  as  to  make  it  possible  to  carry  sufficient 
energy  underground  without  extreme  leakage. 

It  was  1881  that  the  commercial  development  of  the  Edison 
incandescent  lighting  system  started.  I  suppose  I  need  not 
apologize  in  a  meeting  of  Edison  men,  in  talking  of  three  dec- 
ades of  central-station  development,  if  I  speak  all  the  way 
through  of  that  development  as  an  Edison  development.  You 
all  know  just  as  well  as  I  do  that  whatever  details  may  have 
been  contributed  by  others,  the  fundamental  parts  of  our  sys- 
tem, from  the  generator  to  the  lamp,  whether  it  be  the  article 
itself,  or  whether  it  be  the  conception  of  the  great  engineering 
principles  that  have  made  our  business  possible,  can  all  be 
traced  to  the  marvelous  genius  of  the  man  whose  name  we  all 
work  under. 

As  I  came  down  Fifth  Avenue,  New  York,  this  morning, 
my  eyes  turned,  as  they  always  turn  whenever  I  come  down 
Fifth  Avenue,  to  65  Fifth  Avenue.  It  is  a  brownstone  build- 
ing, a  little  south  of  Fourteenth  Street.  In  appearance  the 


344  ADDRESSES  OF  SAMUEL  INSULL 

building  has  changed  somewhat  in  31  years,  but  to  me  it  is 
the  commercial  birthplace  of  this  great  industry.  Between  the 
time  that  it  was  my  privilege  to  receive  the  offer  from  Mr. 
Edison  to  come  to  this  country  to  work  for  him,  and  the  time 
of  my  arrival,  he  moved  his  operations  from  his  laboratory 
at  Menlo  Park  to  65  Fifth  Avenue.  His  reason  for  doing  this 
was  that  the  work,  so  far  as  its  purely  laboratory  experimental 
stages  were  concerned,  was  relatively  through.  The  work 
that  was  ahead  of  him  at  that  time  was  the  commercial  de- 
velopment and  what  you  might  call  the  commercial  experiment- 
ing in  connection  with  the  starting  of  the  business.  The 
Edison  Electric  Light  Company  that  financed  Mr.  Edison's 
experiments  took  the  building  at  65  Fifth  Avenue,  and  Mr. 
Edison  established  his  offices  there. 

COMMERCIAL  DEVELOPMENT  OF  ELECTRIC  LIGHTING 
IN  THE  EIGHTIES 

At  that  time  (I  am  speaking  of  the  early  days  of  March, 
1881,  just  after  the  Edison  Electric  Light  Company's  office  was 
opened  at  65  Fifth  Avenue,  New  York)  there  was  not  a  single 
factory  in  this  country  or  in  Europe  where  you  could  obtain 
generators  suitable  for  the  work.  There  was  not  a  factory 
on  either  side  of  the  Atlantic  where  you  could  obtain  the  con- 
ductors necessary  to  convey  energy,  and  there  was  not  a  lamp 
factory  in  existence  where  you  could  get  lamps  manufactured. 
There  was  a  small  experimental  lamp  factory  at  Menlo  Park, 
which  has  since  disappeared.  My  old  friend,  Mr.  John  Kruesi, 
had  just  taken  a  shop  at  65  Washington  Street,  New  York,  for 
the  manufacture  of  Edison  tubes;  and  a  few  days  after  my 
arrival  here,  Mr.  Edison  leased  from  Mr.  John  Roach,  the 
ship-builder,  his  old  Aetna  Iron  Works  on  Goerck  Street,  between 
Grand  and  Houston  streets,  over  on  the  East  Side  of  New 
York.  But  it  was  well  into  the  summer  of  1881  before  it  was 
possible  to  turn  out  dynamos,  to  turn  out  conductors,  to  turn 
out  lamps,  for  use  on  the  first  central-station  system. 

Just  imagine,  if  you  can,  that  by  the  wave  of  your  hand  you 


A  STORY  OF  THREE  DECADES  345 

could  bring  about  such  a  condition  of  things  that  all  the  thou- 
sand and  one  articles  used  between  the  generator  and  the  lamp 
were  to  disappear,  and  you  had  to  start  over  again  to  create 
them.  Now  that  was  the  situation  existing  in  the  spring  of 
1881.  We  had  a  few  clumsy  wooden  sockets  and  some  enor- 
mous contrivances  that  went  under  the  name  of  switches.  We 
had  not  even  any  insulated  wire.  We  used  in  the  first  year  of 
the  business  a  wire  which  I  think  was  erroneously  named 
"underwriters'  wire."  It  had  about  the  same  insulation  as 
weatherproof  wire  has  today;  only  the  compound  used  was 
paint  and  was  not  nearly  as  good  as  the  compound  you  now 
use  on  weatherproof  wire.  We  had  a  few  wooden  cleats.  I 
do  not  think  in  the  early  days  we  had  got  as  far  as  to  use  mold- 
ing. Yet  notwithstanding  the  fact  that  everything  had  to  be 
created  —  that  all  that  had  been  demonstrated  in  the  experi- 
mental plant  at  Menlo  Park  was  the  feasibility  of  the  scheme 
from  an  electrical  point  of  view  —  the  first  central-station  in 
New  York,  which  I  think  was  at  255-257  Pearl  Street,  just 
south  of  Fulton  Street,  was  built  and  put  in  operation  some 
time  in  September,  1882. 

A  SLEEPY  PRIVATE  SECRETARY  AND  A  FRIENDLY  POLICEMAN 

Let  me  relate  a  personal  incident  in  connection  with  the 
building  of  the  first  system  in  New  York.  I  remember  that 
during  the  summers  of  1881  and  1882  the  weather  was  some- 
what warmer  than  it  has  been  in  New  York  and  Brooklyn 
today.  My  friend  Mr.  Kruesi  used  to  superintend  the  manu- 
facture of  the  two-conductor  Edison  tubes  by  day,  and  Mr. 
Edison  and  Mr.  Kruesi  (who  were  the  only  two  men  who  knew 
anything  about  it)  used  to  spend  their  nights  laying  the  tubes 
in  the  streets  and  testing  the  conductors  for  insulation.  I  used 
to  have  to  work  all  day  myself  on  the  business  end  of  affairs; 
but  I  was  anxious  to  get  some  technical  knowledge  of  the  sub- 
ject that  was  being  dealt  with.  I  do  not  know  whether  it  was 
curiosity,  ambition,  or  what  it  was,  but  I  wanted  to  know  what 
was  going  on;  and  I  used  to  go  downtown  toward  evening,  about 


346  ADDRESSES  OF  SAMUEL  INSULL 

four  nights  out  of  seven,  with  Mr.  Edison  —  the  other  three 
we  had  to  sleep  —  and  my  job  was  to  watch  a  galvanometer. 
I  got  a  closer  acquaintance  with  the  police  then  than  it 
has  been  my  good  fortune  to  get  since.  During  the  weary 
hours  when  I  was  watching  the  pointer  of  the  galvanometer, 
and  wondering  what  I  was  doing  it  for,  and  wondering  what 
they  were  finding  out  about  it,  I  would  doze  off  to  sleep;  and 
when  the  figure  of  Mr.  Edison  or  Mr.  Kruesi  happened  to  come 
around  the  corner,  my  friend  the  policeman  would  give  me  a 
poke  with  his  night-stick,  and  by  the  time  the  one  gentleman 
or  the  other  got  to  the  corner  of  Ann  and  William  streets,  or 
Nassau  and  Fulton  streets,  I  would  have  my  story  about 
correct  as  to  what  had  taken  place.  Of  course  it  was  only  a 
question  of  a  very  few  nights  before  they  found  out,  and  got 
some  fellow  who  could  keep  awake. 

EDISON  RISKED  His  PRIVATE  FORTUNE 

While  the  first  central-station  system  installed  ultimately 
proved  a  financial  success,  in  the  early  days  of  its  operation 
its  customers  were  relatively  few,  although  its  service  was 
extremely  good.  I  think  it  ran  for  about  14  months  without  a 
breakdown,  which  was  a  remarkable  record  for  a  primary  com- 
mercial experiment.  The  capitalists  who  had  supplied  the 
first  million  dollars  necessary  to  build  this  first  system  lost 
heart,  and  I  think  it  redounds  very  greatly  to  the  credit  of 
Mr.  Edison  that,  besides  risking  what  personal  fortune  he  had 
at  that  time  in  the  development  of  manufacturing  establish- 
ments to  produce  the  apparatus  necessary  for  use  in  connec- 
tion with  his  system,  the  financing  of  the  operating  system  itself 
was  done  by  Mr.  Edison  to  the  extent  of  several  hundred 
thousand  dollars  until  the  operation  of  the  Pearl  Street  plant 
had  arrived  at  a  point  where  the  capitalists  regained  confidence 
enough  to  supply  more  money.  I  don't  know  whether  even 
Mr.  Edison  would  remember  today  that  such  was  the  case. 
Probably  I  am  the  only  man  living  who  had  to  do  with  the 
details  of  the  venture  who  knows  that  the  facts  are  as  I  have 


A  STORY  OF  THREE  DECADES  347 

stated.  I  made  up  my  mind  that  I  would  make  this  statement 
here  tonight  as  a  matter  of  record  to  show  how  far  Mr.  Edison's 
unbounded  belief  in  his  own  invention  went. 

I  can  well  remember,  as  recently  as  1884,  that  everything 
that  Mr.  Edison  had  —  and  he  had  started  as  most  of  us 
started:  whatever  he  got  was  from  the  work  of  his  marvelous 
intellect  —  I  say  I  can  well  remember  that  as  late  as  1884, 
with  every  dollar  he  had  risked  in  this  business,  he  asked  me 
one  day  whether  I  thought  he  could  clean  up  and  be  out  of  debt, 
and  that  if  he  went  back  to  telegraph  operating,  whether  I 
thought  I  could  make  a  living  by  going  back  to  shorthand 
writing. 

How  THE  THREE-WIRE  SYSTEM  CAME  INTO  BEING 

If  my  recollection  is  correct,  it  was  in  the  winter  of  1882 
that  Mr.  Edison  came  to  the  conclusion  that  in  order  to  get  a 
great  commercial  development  it  was  necessary  to  provide  a 
system  of  distribution  requiring  less  copper  than  the  two-wire 
system.  At  that  time  he  had  transferred  his  experimental 
laboratory,  much  to  the  regret  of  the  men  who  were  responsible 
for  the  financing  of  the  establishment,  to  the  shops  of  the  Edison 
Machine  Works  on  Goerck  Street,  the  predecessor  of  the  present 
Schenectady  works  of  the  General  Electric  Company.  I 
remember  going  down  there  one  winter  night  in  1882,  just 
by  accident,  and  seeing  Edison's  first  experiment  on  the  three- 
wire  system.  He  hadn't  set  the  mathematicians  at  work  at 
that  time  to  see  how  much  copper  could  be  saved.  He  was 
simply  taking  a  short  cut,  and  seeing  whether  it  was  possible 
to  operate  a  three- wire  system.  He  had  the  two  brushes  on  the 
dynamo  in  their  regular  position  and  a  third  brush  on  the  neu- 
tral point.  A  neutral  wire  was  stretched  across  the  room  with 
the  other  two  wires.  Lamps  were  connected  on  each  side.  As 
the  machine  was  only  about  a  100-volt  machine,  he  had  50- 
watt  lamps  burning  on  each  side  of  the  three-wire  circuit.  And 
that  was  all  the  experimenting  there  was  to  the  three-wire 
system! 

There  was  a  lot  of  theorizing  as  to  what  the  saving  was. 


348  ADDRESSES  OF  SAMUEL  INSULL 

The  inventor  was  pretty  deaf  even  at  that  time.  I  shouted  to 
him,  and  said:  "Mr.  Edison,  how  much  copper  do  you  think 
that  will  save?'*  "Oh,"  he  answered,  "you  are  alway  looking 
at  it  from  the  dollar  point  of  view!"  He  added:  "I  think  it 
will  save  about  two-thirds."  And  I  think  two-thirds  was 
about  what  it  did  save.  At  the  same  time  Professor  Hopkin- 
son  in  England  and  Werner  von  Siemens  in  Germany  were 
working  on  the  same  idea.  I  am  under  the  impression,  although 
it  is  many  years  since  I  read  the  record,  that  Professor  Hop- 
kinson  thought  it  possible  that  25  per  cent  of  copper  could 
be  saved.  I  don't  know  the  percentage  which  von  Siemens 
thought  could  be  saved. 

But  that  little  experiment  in  the  workshop  on  Goerck 
Street  was  the  thing  that  gave  impetus  to  the  central-station 
business.  At  that  time  we  were  looking  for  something  to  en- 
able us  to  start  central-station  systems  in  small  towns.  The 
capitalists  in  the  larger  cities  were  not  prepared  to  go  ahead. 
After  the  start  of  the  station  in  New  York  and  the  one  in  Apple- 
ton,  Wis.,  in  1882,  a  small  station  in  Dijon,  France,  was  put 
into  service  on  June  8,  1883.  During  the  same  year  there 
were  relatively  small  stations  started  in  Santiago,  Chile;  Milan, 
Italy;  Manchester,  England,  under  the  supervision  of  Professor 
Hopkinson  (who,  as  I  have  just  stated,  also  worked  on  the 
three- wire  system),  and  at  Holborn  Viaduct  in  London.  The 
great  uncertainty  of  the  investment,  the  great  risk  that  the 
capitalists  thought  there  was  in  putting  money  into  the  busi- 
ness, led  us,  as  I  have  said,  to  endeavor  to  cheapen  the  system 
and  apply  it  to  small  towns. 

EDISON  AS  AN  ELECTRICAL  ENGINEER 
Our  electrical  engineering  was  always  good.  There  were 
not  quite  as  many  electrical  engineers  with  parchments  at 
that  time;  but  we  had  one  man  who  was  very  careful  to  see 
that  the  electrical  engineering  was  good,  and  that  was  Edison. 
But  the  steam  engineering  was  wretched.  We  tried  to  make 
it  as  cheap  as  we  possibly  could.  We  went  through  the  small 
towns  in  Massachusetts  and  in  Pennsylvania  and  Ohio,  and 


A  STORY  OF  THREE  DECADES  349 

endeavored  to  start  small  plants.  I  had  the  honor  to  run  the 
department  that  installed  the  plants.  It  was  called  the  Thomas 
A.  Edison  Construction  Department,  and  some  fellow  who  was 
a  little  quicker  at  repartee  than  he  was  at  accepting  responsi- 
bility called  it  the  "Destruction  Department,"  because  of  the 
numerous  troubles  we  had  in  starting  stations  and  operating 
them.  While  we  got  a  few  million  dollars  invested  in  the  busi- 
ness, it  is  probable  that  by  1885  there  was  not  much  more 
than  $5,000,000  invested  in  the  central-station  business.  Of 
course  when  I  speak  of  the  central-station  business,  I  speak  of  a 
multiple-arc  system  from  which  energy  can  be  taken  for  all 
kinds  of  work.  I  do  not  consider  the  series  arc-lighting  plants, 
which  were  general  throughout  the  country  at  that  time,  as 
serious  attempts  at  central-station  service. 

In  1885  the  records  show  that  there  were  about  400  lighting 
companies,  but  most  of  those  were  series  arc-lighting  companies, 
and  the  probability  is  that  at  that  time  there  were  less  than  50 
or  60  companies,  and  all  of  them  small,  giving  electrical  service; 
that  is,  distributing  electrical  energy  24  hours  a  day  and  365 
days  in  the  year. 

In  1885  my  friend  Mr.  Edward  H.  Johnson  made  an  effort 
to  raise  the  capital  to  start  a  central-station  system  in  another 
large  city,  and  he  picked  out  Boston  for  the  purpose.  So  far  as 
my  recollection  serves  me,  if  it  had  not  been  for  the  money  put 
into  the  enterprise  by  the  Edison  Electric  Light  Company 
(that  is,  the  patent-owning  company),  some  assistance  rendered 
by  the  manufacturing  companies,  and  the  personal  subscription 
of  Mr.  J.  Pierpont  Morgan,  who  always  was  a  warm  friend  of 
the  Edison  central-station  business  —  if  it  hadn't  been  for 
those  three  elements,  it  would  have  been  impossible  to  provide 
the  capital  to  build  a  station  in  Boston. 

THE  INDUSTRY  ESTABLISHED  IN  ONE  DECADE 

The  station  was  started,  I  think  in  February,  1886,  and 
the  distribution  system  was  by  overhead  wires.  I  believe  it 
was  not  until  two  or  three  years  later  that  the  first  ten  miles 
of  underground  conductors  was  installed.  It  is  interesting  to 


350  ADDRESSES  OF  SAMUEL  INSULL 

note  that  the  first  alternating-current  system,  which  has  done 
so  much  for  the  industry  in  its  larger  development,  was  started 
the  same  year  (1886)  by  the  Westinghouse  Company  at  Greens- 
burg,  Pa. 

In  1887  the  building  of  the  first  Chicago  station  was  com- 
menced on  the  site  of  the  present  120  West  Adams  Street 
building.  The  station  was  finished  and  put  in  operation  on 
August  6,  1888. 

The  closing  years  of  the  first  decade  of  central-station 
development  were  signalized  by  the  first  electrical  congress  and 
exposition  of  any  consequence  held  in  Europe,  and  which  was 
held  at  Paris,  in  1889.  In  that  year,  I  believe,  the  first  Brooklyn 
station  was  put  in  operation.  It  is  rather  interesting  to  note 
that  it  was  at  the  Paris  Electrical  Congress  of  1889  that  the 
watt  was  authoritatively  defined  as  the  unit  of  electric  power. 
Prior  to  that  time  we  did  all  our  metering  on  a  lamp-hour  basis, 
and  for  many  years  after  that  most  of  the  Edison  companies 
did  their  metering  on  lamp-hour  basis. 

It  was  about  this  time  that  stations  were  started  generally 
throughout  the  world.  The  English  manufacturers  had  become 
interested  in  the  industry,  and  more  especially  the  great  house 
of  Siemens  &  Halske,  of  Berlin,  became  interested  in  the 
industry.  The  first  plant  was  built  in  Berlin  in  the  later 
eighties,  and  about  1887  the  first  modern  type  of  machine 
with  direct-connected  generators,  made  in  the  shops  of  Siemens 
&  Halske,  was  installed  in  the  first  station  of  the  Berlin  com- 
pany. 

It  took  about  three  decades,  thirty  years,  to  establish  the 
commercial  value  of  gas.  Owing  partly  to  the  differences  in 
general  conditions  of  living,  and  partly  to  the  better  original 
invention,  it  took  but  one  decade  to  establish  the  commercial 
possibilities  of  the  electric-power  and  electric-lighting  industry. 

GREAT  EXPANSION  OF  THE  SECOND  DECADE 

We  now  enter  upon  the  second  decade  of  central-station 
development.  As  I  have  said,  the  first  decade  was  occupied 


A  STORY  OF  THREE  DECADES  351 

with  laboratory  experiments  and  what  you  might  call  the  com- 
mercial experiments;  but  it  was  in  the  second  decade  of  the 
business  that  the  real  commercial  development  took  place.  I 
am  inclined  to  think  that  the  main  causes  for  the  great  increase 
in  the  business  from  the  year  1890  to  1900,  which  practically 
forms  the  second  decade  of  central-station  development,  can 
be  traced  to  the  commercial  end  of  the  business  entirely. 
In  the  early  part  of  that  period,  the  first  half  of  that  period, 
the  years  extending  from  1890  to  about  1895,  we  first  began  to 
learn  something  about  the  underlying  principles  necessary  to  be 
mastered  in  order  to  produce  a  proper  balance  sheet.  In  other 
words,  we  first  began  to  learn  something  about  the  way  to 
sell  our  product.  I  think  it  is  a  fair  statement  to  make  that 
there  was  not  a  man  in  the  central-station  business  prior  to 
1890  who  understood  anything  about  the  principles  controlling 
the  proper  disposal  of  the  product  that  he  manufactured. 

While  Europe  had  to  come  to  this  country  to  learn  some- 
thing about  the  underlying  principles  of  engineering  of  central- 
station  development,  we  had  to  go  to  Europe  to  learn  something 
about  the  principles  underlying  the  sale  of  the  product.  I 
think  we  owe  more  to  Mr.  Arthur  Wright,  who  sometime  in  the 
early  nineties  was  the  manager  of  the  municipal  plant  at 
Brighton,  England,  than  to  any  other  one  man  so  far  as  teach- 
ing us  the  fundamentals  governing  the  sale  of  our  product.  I 
have  no  recollection  of  hearing  anything,  except  in  the  most 
general  terms,  about  load  factor,  or  the  necessity  of  long-hour 
customers  and  the  desirability  of  selling  to  them  at  a  lower 
price  than  to  short-hour  customers,  until  I  first  met  Mr. 
Wright,  and  saw  what  he  was  doing  in  that  direction  in  the 
city  of  Brighton. 

The  lessons  he  taught  us  are  the  commonplaces  of  today. 
We  still  have  a  few  people  who  don't  agree  with  us,  or  who  sell 
their  product  on  what  we  call  a  flat-rate  basis;  but  I  suppose 
99  per  cent  of  the  people  in  the  central-station  business  have 
come  to  the  conclusion  that  the  only  way  to  sell  energy  is  on  a 
basis  that  gives  to  the  man  who  uses  it  the  greatest  amount  of 
time  during  a  given  period  the  least  possible  price. 


352  ADDRESSES  OF  SAMUEL  INSULL 

COMMERCIAL  DEVELOPMENT  OF  AN  ENGINEERING  BUSINESS 

The  reason  I  am  dwelling  on  this  particular  point  is  because 
I  wish  especially  to  present  to  you  here  this  evening  the  great 
importance  of  the  commercial  element  in  the  development  of 
what  is  an  engineering  business.  The  sale  of  our  product  in 
larger  quantities  than  it  had  been  sold  heretofore,  starting,  as 
I  say,  in  the  nineties  has,  in  my  judgment,  been  the  main  cause 
which  has  forced  most  of  the  developments  that  have  taken 
place  since  the  original  three-wire  system  was  brought  into  use, 
and  since  the  first  alternating-current  plants  were  established 
by  the  Westinghouse  company. 

This  large-quantity  sale  led  to  a  greater  density  of  energy 
consumption  in  a  given  area.  That  led,  of  course,  to  greater 
demands  for  larger  sized  generating  units,  and  that  led  to  the 
production  of  modern  types  of  engines  of  larger  sizes  as  com- 
pared with  anything  we  had  used  with  belted  generators,  and 
ultimately  to  other  developments. 

The  first  electrical  power  transmission  system  established 
in  this  country  was  established  in  1890,  connecting  a  small 
Colorado  town  with  a  mine  some  miles  outside  the  town.  The 
year  1891  gave  us  direct-connected  units  in  this  country  of 
higher  efficiencies  and  lower  speeds.  The  year  1893  gave  us 
the  World's  Fair  at  Chicago,  which,  above  everything  else  that 
had  occurred  up  to  that  time,  was  an  electrical  display  and  one 
that  was  well  worthy  of  the  development  that  had  been  attained 
in  the  art  up  to  that  date. 

In  1894  the  most  economical  station  built  up  to  that  time 
was  started  in  Chicago  —  the  Harrison  Street  station  —  with 
modern  types  of  marine  engines.  I  think  it  was  the  second  or 
third  station  of  that  kind  built  in  this  country.  There  was  one 
here  in  New  York,  and  another  in  Milwaukee,  I  think,  that 
preceded  it.  But  it  was  the  first  time  that  energy  had  been 
produced  at  anything  like  a  moderate  cost  —  a  cost  which, 
however,  more  nearly  approaches  our  selling  price  of  today  than 
our  cost. 

Probably  the  next  most  important  development  that  took 


A  STORY  OF  THREE  DECADES  353 

place  was  copying  the  experiences  of  the  first  transmission  sys- 
tem in  Colorado,  and  also  more  formidable  work  of  the  same 
character  that  had  taken  place  in  Europe,  and  applying  it  to 
central-station  practice.  The  first  rotary  converters  used 
in  connection  with  an  Edison  central  station  anywhere  were 
started  by  the  Brooklyn  Edison  Company  and  the  Chicago 
Edison  Company  in  October,  1897,  and  I  believe  the  engineers 
of  the  two  companies  are  still  disputing  in  relation  to  the 
claim  of  priority. 

LARGE  UNITS  INTRODUCED  IN  THE  THIRD  DECADE 

This  brings  us  to  the  modern  central  station  and  distribu- 
tion system.  The  three-wire  distribution  system,  the  rotary- 
converter  station,  the  high-tension  transmission  cables  and 
the  direct-connected  large-sized  reciprocating-engine  alternat- 
ing-current units  form  what  was  in  the  year  1900,  or  a  little 
later,  the  best  form  of  modern  central-station  practice.  The 
massing  of  production  of  energy  in  large  quantities,  the  cheap- 
ening of  the  relative  cost  of  investment  and  the  cheapening 
of  the  cost  of  operating  —  in  fact,  the  lessons  learned  through 
the  second  decade  of  central-station  development,  which  was 
the  period  of  commercial  development  —  practically  forced 
the  introduction  of  still  larger  units  as  prime  movers.  The 
reciprocating  engine  reached  its  limit,  practically,  at  5,000  to 
6,000  kilowatts.  Six  thousand  kilowatts  is  a  pretty  high  amount 
for  a  reciprocating  engine  to  produce,  and  those  of  us  who  were 
engaged  in  the  distribution  of  large  amounts  of  energy  were 
looking  for  some  other  means  of  central-station  production. 
That  was  at  the  close  of  the  second  decade  of  the  development 
of  our  business. 

The  steam  turbine,  developed  by  the  Hon.  Sir  Charles  A. 
Parsons  in  England,  had  gone  along  relatively  slowly.  We  had 
seen  one  or  two  of  them  in  this  country.  I  think  my  friend, 
Mr.  Bowker,  brought  the  first  one  to  the  United  States.  (Mr. 
Williams1  corrects  me  and  says  that  the  first  turbine  brought 

1.  Mr.  Arthur  Williams,  general  inspector  of  the  New  York  Edison  Com- 
pany and  past-president  of  the  National  Electric  Light  Association. 


354  ADDRESSES  OF  SAMUEL  INSULL 

here  by  Mr.  Bowker  was  the  De  Laval.)  Then  the  Westing- 
house  Company  brought  over  some  small  Parsons  turbines,  and 
Professor  Curtis  commenced  his  experiments  on  what  has 
been  developed  into  the  Curtis  steam  turbine,  as  made  by  the 
General  Electric  Company. 

I  can  well  remember,  as  a  result  of  a  trip  made  by  Mr. 
Frederick  Sargent,  our  consulting  engineer,  and  Mr.  Louis  A. 
Ferguson,  our  second  vice-president,  to  Europe,  I  think  about 
the  year  1899  or  1900,  that  I  was  ready  to  listen  with  a  more 
receptive  ear  to  the  suggestion  of  Mr.  Coffin,  president  of  the 
General  Electric  Company,  that  he  should  build  a  steam  turbine 
of  the  Curtis  design  for  one  of  our  Chicago  stations. 

SOME  INSIDE    HISTORY  ABOUT    THE  FISK  STREET    STATION 

Mr.  Coffin  wanted,  on  the  advice  of  his  engineers,  to  build 
a  1,000-kilowatt  machine,  or  a  1,000  horse-power  machine  —  I 
forget  which.  I  pointed  out  to  him  that  we  had  reached  a  point 
in  central-station  development  that  enabled  us  to  get  recipro- 
cating engines  of  5,000  or  6,000  kilowatts,  and  that  to  make  a 
steam  turbine  of  a  fifth  that  size  would  be  a  step  backward. 
We  had  long  negotiations  on  the  subject,  and  it  resulted  in  the 
General  Electric  Company  building  for  our  Fisk  Street  station 
in  Chicago  the  first  large  steam  turbine  of  any  make  erected 
and  operated  on  either  side  of  the  Atlantic.  The  shell  of  that 
turbine,  I  believe,  has  been  erected  as  a  monument  to  the  art 
in  the  yards  of  the  Schenectady  works,  and  to  my  mind  it  is  a 
monument  to  one  of  the  greatest  developments  that  has  taken 
place  in  connection  with  our  industry. 

The  ability  to  mass  very  large  amounts  of  energy  produc- 
tion, the  ability  to  do  that  at  a  very  low  investment  cost,  and 
to  produce  the  energy  from  such  machinery  at  an  operating 
cost  never  heard  of  with  reciprocating  engines  and  at  an  effi- 
ciency never  heard  of  with  reciprocating  engines,  has,  to  my 
mind,  had  a  greater  influence  on  the  development  of  our  business 
during  the  last  decade  than  any  other  one  thing.  True,  we 
were  looking  for  some  means  of  producing  energy  in  greater 


Typical  Substations  of  the  Commonwealth  Edison  Company,  Chicago 


Sixty-second  Street 


Jj 


Whipple  Street 


Harding  Avenue 


A  STORY  OF  THREE  DECADES  355 

quantities  at  lower  cost,  and  under  circumstances  of  greater 
reliability  than  production  could  possibly  be  with  a  reciprocat- 
ing engine,  as  compared  with  the  low  investment  cost,  low 
bearing  cost,  and  great  reliability  of  a  rotating  prime  mover; 
but  the  fact  is  that  in  agreeing  to  take  the  risks  of  manufacture, 
and  to  give  the  industry  something  which  it  needed  badly, 
I  think  the  central-station  side  of  the  business  owes  a  great 
deal  to  the  courage  of  my  friend  Mr.  Coffin  in  developing  the 
turbine  business  in  this  country  rather  from  the  point  of  view 
of  large  units  downward  than  from  the  point  of  view  of  small 
units  upward. 

The  history  of  the  last  decade,  bringing  us  directly  up  to 
today  or  yesterday,  has  been  one  of  marvelous  progress  in  our 
industry,  but,  to  my  mind,  it  is  but  the  start  of  what  we  can 
expect  may  come  in  the  future. 

PRESENT-DAY  MASSING  OF  PRODUCTION 

It  seems  to  me  that  the  true  function  of  a  central-station 
company  is  to  produce  all  of  the  energy  used  in  the  community, 
not  necessarily  limited  to  the  territory  in  which  it  now  operates, 
but  in  the  community  of  an  area  which  it  can  economically 
reach.  Some  years  ago  I  used  to  talk,  whenever  I  went  to 
Europe,  with  my  friend  Dr.  Rathenau,  the  head  of  the  great 
Allgemeine  Electricity  Company  of  Germany,  on  the  subject 
of  central-station  areas.  I  think  I  first  got  from  him  the 
idea  that  I  should  look  a  little  beyond  my  nose,  and  see  if  there 
was  not  some  territory  outside  of  the  narrow  limits  in  which  I 
was  then  operating  which  could  be  economically  reached  from 
a  large  generating  station.  I  do  not  think  we  have  any  con- 
ception of  the  savings  that  can  be  effected  by  concentration  of 
production  and  distribution.  I  have  tried  to  figure  somewhat 
on  the  subject  myself;  but  when  one  takes  into  account  the 
remarkable  growth  of  the  large  centers  of  population,  especially 
in  this  country,  it  is  almost  impossible  to  figure  the  possible 
savings  that  can  be  produced  by  concentration  of  production 
and  concentration  of  distribution. 

We  are  living  in  an  era  when  our  public  men  look  askance 


356  ADDRESSES  OF  SAMUEL  INSULL 

at  the  encouragement  of  monopoly  —  generally  industrial 
monopoly  —  but  fortunately  we  are  engaged  in  a  business 
which,  it  is  generally  recognized,  can  be  run  more  economically 
as  a  monopoly,  and  which  is  generally  subject  to  legislative 
regulation. 

CULTIVATE  THE  GOOD  WILL  OF  THE  PUBLIC 

Before  I  take  my  seat  I  want  to  talk  to  you  the  same  way 
that  I  talk  to  my  own  "boys"  on  the  subject  of  your  personal 
responsibility  to  the  business  in  which  you  are  engaged.  I 
always  say  that  it  makes  no  difference  to  me  whether  the  posi- 
tion occupied  by  a  man  be  that  of  general  manager  or  coal 
passer.  More  or  less  all  men  who  work  for  public-service 
corporations  are  hi  the  public  eye.  I  do  not  care  whether  it  is 
the  head  of  the  business,  whose  name  most  frequently  appears 
in  the  newspapers,  or  whether  it  is  the  man  occupying  a  subor- 
dinate position  —  both  are  in  the  public  eye,  so  far  as  our  busi- 
ness is  concerned.  If  our  business  is  to  be  permanently  suc- 
cessful; if  we  are  to  obtain  and  hold  the  good  will  of  the  com- 
munities in  which  we  operate;  if  we  are  to  be  allowed  by  the 
governmental  bodies  having  charge  of  such  matters,  whether 
legislative  or  administrative,  to  extend  our  monopolies  —  we 
must  defer  to  public  opinion.  I  think  that  all  our  people  should 
try  to  achieve  the  highest  possible  standing  in  the  community 
in  which  they  live.  They  should  bear  in  mind  that  their  per- 
sonal conduct  for  good  or  ill  is  an  addition  to  or  subtraction 
from  the  good  will  which  the  public  bears  towards  the  busi- 
ness on  which  we  are  all  dependent  for  our  livelihood. 

I  do  not  know  of  any  business  that  offers  the  opportunity 
to  the  average  man,  not  necessarily  to  the  man  of  great  ability, 
but  to  the  average  man,  as  that  offered  by  our  business.  I  do 
not  know  of  any  business  that  is  less  affected  by  changes  in 
general  conditions  of  business  than  our  business;  that  gives 
greater  continuity  of  service.  The  message  that  I  want  to 
leave  with  you  is  one  which  will  lead  every  man  in  this  room  to 
feel  a  personal  responsibility  with  relation  to  the  success  of 
the  Edison  Electric  Illuminating  Company  of  Brooklyn. 


THE  PRODUCTION   AND   DISTRIBUTION 
OF  ENERGY1 


HE  FIGURES  that  have  been  so  ably  presented  are 
certainly  somewhat  staggering.  I  do  not  think  I 
have  ever  heard  them  presented  in  exactly  the  same 
form  before.  While  it  is  my  duty  tonight,  and  my  pleasure, 
to  address  you  on  the  subject  of  the  generation  and  distribution 
of  energy  —  that  is,  electrical  energy  —  I  have  no  intention,  ex- 
cept in  the  most  incidental  way,  to  refer  to  the  work  that  we  are 
doing  in  Chicago.  Whenever  I  have  addressed  a  similar  body 
on  the  subject  of  the  economical  production  and  distribution 
of  energy  I  have  usually  referred  to  the  means  of  production  in 
great  cities  and  the  distribution  of  energy  for  use  in  those  cities, 
and  have  tried  to  demonstrate  that  the  truly  economical 
method  to  pursue  is  the  manufacture  and  distribution  of  all 
such  energy  under  one  organization.  In  discussing  this  sub- 
ject, especially  in  the  address  given  in  the  city  of  New  York, 
before  the  American  Institute  of  Electrical  Engineers  about  a 
year  ago,  I  have  referred  to  the  necessity  of  having  very 
large  prime  movers  —  a  necessity  which  undoubtedly  exists,  in 
order  to  get  economical  production  in  large  cities;  but  this 

1.  A  lecture  delivered  before  the  Franklin  Institute  in  Philadelphia  on 
March  19,  1913.  In  this  address  the  author  gave  the  most  elaborate  and 
scientific  exposition  that  he  had  yet  attempted  of  the  benefits  of  concentrating 
the  production  and  distribution  of  electrical  energy  over  wide  areas.  The 
Franklin  Institute  of  the  State  of  Pennsylvania,  to  employ  the  official  name, 
was  incorporated  in  1824.  During  its  long  and  honorable  career  it  has  dis- 
seminated much  information  on  nearly  every  subject  connected  with  the  useful 
arts.  To  a  considerable  extent  the  Journal  of  the  Franklin  Institute  has  been 
the  medium  of  this  communication.  The  present  chapter  is  reprinted,  with  a 
few  changes,  from  that  publication.  Mr.  Walton  Clark,  as  president  of  the 
Franklin  Institute,  introduced  Mr.  Insull.  In  doing  so  he  sketched  briefly 
the  rapid  development  of  Chicago's  electrical  interests,  giving  figures  and  data, 
referring  also  to  the  active  part  taken  in  such  development  by  Mr.  Insull.  The 
opening  sentences  in  the  text  refer  to  the  introduction. 

357 


358  ADDRESSES  OF  SAMUEL  INSULL 

evening  I  intend  to  give  my  attention,  and  to  ask  you  to  give 
your  attention  also,  to  exactly  the  opposite  point  of  view. 
I  purpose  to  take  the  smallest  prime  movers  that  I  have  had 
anything  to  do  with  in  the  smallest  generating  stations  in  the 
rural  and  agricultural  territory  of  Illinois,  and,  starting  from 
that  point,  to  draw  your  attention  to  the  various  uses  to  which 
electrical  energy  can  be  put  in  performing  the  various  duties 
required  of  it,  for  the  benefit  of  the  local  farming  community, 
the  small  country  towns  surrounded  by  such  farming  com- 
munities, the  lowlands  of  the  state  requiring  drainage,  the 
mines  of  the  state  requiring  electrical  power,  and  the  inter- 
urban  roads  traversing  the  state  and  requiring  energy  for  the 
propulsion  of  their  cars.  If  time  will  permit,  I  will  endeavor 
to  show  you  that  the  true  economic  method  of  the  production 
and  distribution  of  energy  for  all  these  purposes,  and  for  some 
other  purposes  to  which  I  will  incidentally  refer,  necessarily 
involves,  so  far  as  a  state-wide  service  is  concerned,  concentra- 
tion of  production,  concentration  of  distribution,  and,  if  you 
may  choose  to  call  it  so,  monopoly  of  administration  of  the 
business  of  producing  and  distributing  electrical  energy.1 

ELECTRICAL  REQUIREMENTS  OP  LAKE  COUNTY,  ILLINOIS 

I  now  come  to  the  main  part  of  my  lecture.  The  reason  I 
have  chosen  the  Lake  County  district  and  surrounding  ter- 
ritory, shown  in  Fig.  1,  which  is  the  extreme  northern  corner 
of  Illinois,  facing  on  Lake  Michigan,  is  that  this  probably  is  the 
poorest  territory  for  the  purpose  of  central-station  distribution 
that  it  has  been  my  fortune  to  operate  in.  The  plants  were 
acquired  in  that  territory  in  the  year  1910. 

The  towns  marked  by  the  crossed-circle  emblem  are  twelve 
in  number,  with  a  population  of  7,886.  Those  marked  by  a 
solid  black  dot  are  the  only  towns  in  the  territory  which  had 
electric  service,  and  that  at  night  only. 

1.  Mr.  Insull  here  repeated  four  of  the  charts  showing  the  energy  require- 
ments, with  diversity  factors,  of  New  York  and  Chicago,  previously  given  in 
his  A.  I.  E.  E.  address  on  "The  Relation  of  Central -Station  Generation  to 
Railroad  Electrification." 


STATE-WIDE  SERVICE 


859 


The  next  chart,  Fig.  2,  shows  the  condition  two  years  later, 
in  1912.  There  are  only  two  places  in  the  county  without  elec- 
tric service.  There  are  twenty  towns  served,  having  a  popula- 
tion of  22,188  people,  and  there  are  125  customers,  which  are 
mostly  farmers,  outside  the  corporate  limits  of  any  of  the  vil- 
lages in  that  territory. 


i  — WISCONSIN       LINE 


YEAR   1910 

8  TOWNS  OT  OVEH    30O    POPULATION    WITHOUT    ELECTRIC    8CRVICE 
•  TOWNS    WITH    ELECTRIC    SERVICE    (  AT     NIGHT     ONLY) 

Fig.  1.    Map  of  Lake  County  (Illinois)  District  in  1910 

Fig.  3  shows  the  distribution  system  outside  of  one  of  the 
villages  which  serves  a  number  of  farms.  Some  two  years  ago, 
when  that  territory  was  taken  over,  an  isolated  plant  was 
acquired  which  a  gentleman  farmer  who  had  a  very  large  farm 
in  this  vicinity  had  installed  and  which  supplied  a  few  of  the 
neighboring  farmers  in  addition  to  the  owner's  requirements, 
forming  the  nucleus  of  the  rapidly  developing  load  of  this 
territory.  The  main  circuit  is  installed  on  the  same  poles 
with  the  transmission  lines. 

The  monthly  variation  hi  energy  used  on  68  farms  is  shown 


ADDRESSES  OF  SAMUEL  INSULL 


ILLINOIS-WISCONSIN  LIME 


9  TOWNS   OF  OVER  300   POPULATION    WITHOUT    ELECTRIC    SERVICE 

»  TOWNS   OF   OVER  300    POPULATION    WITH    «4     HOUR    ELECTRIC    SERVICE 

>    CUSTOMERS    OUTSIDE    OF  TOWNS     WITH    24     HOUR   ELECTRIC   SERVICE 

Fig.  2.    Map  of  Lake  County  (Illinois)  District  in  1912 


Fig.  3.     Rural  Distribution  System 


STATE-WIDE  SERVICE 


361 


in  Fig.  4.  The  annual  kilowatt-hours  for  light  were  23,609 
and  for  power  62,259.  The  lighting  was  27.5  per  cent  of  the 
total,  and  the  power  72.5  per  cent.  The  highest  consumption 
comes  in  the  middle  of  summer,  which  is  the  opposite  time  to 
the  highest  consumption  in  the  adjacent  towns. 


9,000 
8,000 
7,000 
6,000 
5.000 
4,000 
3,000 
2.000 
l.COO 
0 

9000 

/ 

JOIAI 

\. 

/ 

\J 

f 

\ 

1 

$'' 

VNv 

\ 

/ 

\ 

\ 

/ 

6,000 
5,000 
4,000 
3.000 
2.000 

1,000 
0 

1    i 

\ 

\ 

/ 

\ 

/ 

! 

\ 

1 

\ 

J 

^-^ 

/ 

• 

\ 

i  V 

/ 

/ 

ENERGY  USED  ON   68   FARMS  IN 

A  

V 

—  1 

1    \ 

/ 

/' 

LA 
SHOW 

LIGHT 

KE   COUNTY   DISTRICT 
NG    MONTHLY    VAR  ATION 

ANNUAL              PERCENT 

I 

„-' 

\ 

i 

1 

vx 

: 

23,609                       87.5 

' 

^ 

V   \ 

; 

/ 

\ 

. 

^ 

"^ 

\ 

^ 

^ 

s^ 

^> 

^ 

Fig.  4.     Use  of  Electricity  on  Farms,  Illinois,  1912 

Two  typical  farm-load  diagrams  are  given  in  Fig.  5.  They 
indicate,  the  same  as  the  previous  chart,  that  rural  or  farm 
load  has  its  maximum  in  summer.  They  are  plotted  from  actual 
readings  taken  at  the  substation.  The  maximum  occurred 
on  the  day  before  the  Fourth  of  July,  and  the  unusually  high 
evening  lighting  peak  is  explained  by  assuming  that  the  city 
people  came  out  the  evening  before  to  spend  the  Fourth  at  their 
country  places. 


362 


ADDRESSES  OF  SAMUEL  INSULL 


While  these  curves  may  not  be  entirely  representative  of 
general  farming  load,  because  there  are  several  large  farms 
owned  by  wealthy  city  people  whose  freer  use  of  electricity 
probably  influences  the  total,  nevertheless  they  include  a 


Fig.  5.     Typical  Farm-Load  Diagrams 

large  number  of  average-size  farms  conducted  by  farmers  of 
average  means.  The  curves  are  probably  an  indication  of  the 
development  that  is  possible  for  this  class  of  business. 

Table  I  gives  some  actual  statistics  on  these  same  68  farms. 
The  figure  of  2.4  horse-power  for  motors  connected  is  very  low 
indeed,  and  should  eventually  increase  several  times  as  this 
business  is  developed. 


STATE-WIDE  SERVICE 

TABLE  I.  —  DATA  ON  LAKE  COUNTY  FARMS 
Total  number  of  farms 


Average  acres  per  farm  

08 

162 

Incandescent  lamps  in  50-watt  equivalents  
Motors  in  horse-power  

Per  farm 
30.5 

2.4 

Per  acre 

Total  connected  load  in  kilowatts  

3.3 

.... 

Annual  light  kilowatt-hours  

347 

2.14 

Annual  power  kilowatt-hours  

916 

5.65 

Total  kilowatt-hours  

1263 

7.79 

Income  from  light  

....     $41.60 

26c 

Income  from  power  

55.90 

34 

Total  income  ..................................     $97.50  60c 

Fig.  6  shows  a  comparison  of  two  winter-day  load  diagrams 
prorated  to  the  same  maximum,  in  order  to  show  the  growth 
of  the  day  load  in  the  Lake  County  territory  and  the  consequent 
improvement  in  the  load  diagram  and  load  factor  as  compared 
with  the  average  local  town  plant,  of  which  the  diagram  of  26 
towns  recently  taken  over  is  typical. 

I  am  dwelling  at  some  length  on  this  particular  territory 
because  it  is  not  a  manufacturing  district  and  there  are  very 
few  towns  in  it.  The  suburban  district  tributary  to  Chicago, 
as  shown  by  the  map  (Figs.  1  and  2),  has  been  cut  out  of  the 
figures. 

The  annual  load-factor  figures  show  what  can  be  done  in 
the  way  of  improvement  by  unified  control.  The  annual 
load  factor  of  26  towns  recently  taken  over  was  only  22.6  per 
cent,  while  the  load  factor  of  the  Lake  County  district,  after 
two  years  of  unified  control,  has  been  brought  up  to  28.9  per 
cent.  For  comparison,  it  may  be  stated  that  one  of  the  large 
cities  down  the  state  has  a  load  factor  of  30.8  per  cent,  and  the 
Chicago  light-and-power  annual  load  factor,  exclusive  of  rail- 
way service,  is  34  per  cent. 

Table  II  (page  365)  gives  comparison  of  cost  of  energy, 
investment  cost  and  operating  cost  under  the  old  plan,  when 
there  were  a  few  isolated  central  stations  in  small  towns,  with 
cost  of  energy  for  the  same  territory  two  years  later  from  a 
modern  station,  transmission  and  substation  system.  The 


364 


ADDRESSES  OF  SAMUEL  INSULL 


total  cost  of  these  old  stations,  not  including  the  distribution 
systems  used  in  the  towns,  was  $178  per  kilowatt.  In  abandon- 
ing these  stations  and  building  transmission  lines  from  a  town 
on  Lake  Michigan,  where  we  could  get  cheap  energy,  and 


COMPARISON  OF  WINTER  DAY  LOAD  DIAGRAH 
V**RO-  RATED  TO    SAME  MAXIMUM 


CHICAGO  LIGHT  AND  POWER 


Fig.  6.     Diagram  Showing  Benefit  of  Unified  Control 

building  local  substations,  you  will  see  the  cost  was  brought  up 
to  $382  per  kilowatt.  Under  the  old  scheme  the  fixed  charges 
for  investment  per  kilowatt  was  $20.85,  and  under  the  new 
scheme  two  years  later  the  charge  was  $42.60.  These  figures 
would  seem  to  indicate  rather  a  prohibitive  proposition,  so 
far  as  the  new  scheme  of  unification  is  concerned,  as  compared 


STATE-WIDE  SERVICE  365 

with  small  isolated  stations.     But  if  you  go  a  little  lower  down 

you  will  see  that  under  the  old  scheme  we  had  only  14.6  per 
cent  load  factor,  whereas  with  a  unified  system  of  power  we 
had  28.9  per  cent  load  factor. 

TABLE  II. — COMPARISON  OF  COST  OF  ENERGY 

Lake  County  District 

1910  1912 
Investment  per  kilowatt  of  maximum — 

Generating  station $178  $122 

Substation .  .  70 

Transmission . .  190 

Total $178  $382 

Fixed  charge  on  investment  per  kilowatt  of  maximum     $20 . 85  $42 . 60 

Maximum  kilowatts 573  963 

Load  factor 14.6%  28.9% 

Costs  per  kilowatt-hour  at  local  plant  or  substation — 

Fuel 2.04c  .61c 

Other  operation,   including  substation    and    trans- 
mission           3 . 42  .56 

Fixed  charges  on  investment 1 . 62  1 . 68 


Total  costs 7.08c          2.85c 

Showing  a  saving  in  supplying  this  district  from  unified  power  supply  and 
transmission  system  of  4 . 23  cents  per  kilowatt-hour. 

Applying  these  respective  load  factors  to  the  fixed  charges 
on  investment  you  will  find  that  the  fixed  charge  per  kilowatt- 
hour  figures  out  only  a  mere  fraction  higher  under  the  new 
scheme,  owing  to  the  great  difference  in  load  factor. 

If  you  go  still  lower  down  you  will  find  that  the  fuel  cost 
under  the  old  scheme  is  2.04  cents,  whereas  under  the  new 
scheme  it  is  0.61  cent.  The  substation  and  transmission  op- 
erating and  other  station  operating  expenses  are  relatively  even 
lower  under  the  new  scheme  than  under  the  old. 

These  operating  costs  include  not  only  the  station  cost  but 
the  operation  and  maintenance  of  transmission  lines  and  sub- 
stations and  the  losses  in  transmission  from  station  to  sub- 
station, also  the  conversion  loss  in  the  substation;  but  the 
figures  do  not  include  in  either  case  any  local  distribution  ex- 
pense or  general  expense.  So  that  when  you  come  to  total  up 


366  ADDRESSES  OF  SAMUEL  INSULL 

these  figures,  notwithstanding  that  apparently  you  start  out 
with  over  twice  the  investment,  you  will  find  your  base  cost 
per  kilowatt-hour  at  the  local  lighting  plant  or  substation 
under  the  old  plan  was  7.08  cents  per  kilowatt-hour,  and  under 
the  new  plan  2.85  cents,  showing  a  saving  of  4.23  cents  per 
kilowatt-hour. 

Table  III  gives  us  some  further  figures  on  this  same  Lake 
County  territory. 

TABLE  III.— LAKE  COUNTY  DISTRICT 

Separate  Unified  pow- 
management  er  and  trans- 
in  each  town,  mission  system 

1910  1912 

conditions         conditions 

Population  served 15,395  22,188 

Number  of  towns  served 10  20 

Number  of  customers 1,422  3,457 

Connected  load  in  kilowatts 2,033  4,503 

Kilowatt-hours  sold 699,574        1,898,978 

Kilowatt-hours  sold  per  capita 45  86 

Income $62,371  $136,694 

Income  per  kilowatt-hour 8.9c  7.2c 

Income  per  customer $43.86  $39 .54 

Income  per  capita $4.05  $6. 16 

Maximum  kilowatts 573  963 

Annual  load  factor 14.6%  28.9% 


REQUIREMENTS  OF  VARIOUS  ILLINOIS  UTILITIES 

Fig.  7  is  a  load  diagram  showing  general  light-and-power 
requirements  for  the  maximum  day  in  26  Illinois  towns. 

These  are  the  actual  load  curves  for  26  plants,  and  it  will  be 
noted  that  those  for  Northwestern  Illinois  show  a  very  much 
better  day  load  than  those  for  Central  Illinois,  probably  due  to 
the  fact  that  the  Northwestern  Illinois  properties  were  acquired 
about  a  year  earlier  and  the  power  load  has  been  better  devel- 
oped. The  Lake  County  diagram  still  further  emphasizes 
this  point. 

The  total-light-and-power  diagram  for  the  state  has  been 


STATE-WIDE  SERVICE 


367 


prorated  from  this  diagram,  and  while  this  probably  gives  us 
the  approximate  diagram  and  kilowatt-hour  output  for  the 
state  for  this  present  winter,  the  improvement  in  load  factor 
and  increase  in  kilowatt-hour  output  should  be  very  rapid;  that 
is,  we  might  have  estimated  the  total  light  and  power  for  the 
state  based  on  the  Lake  County  diagram,  which  would  have 


Fig.  7.     Maximum-Day  Diagram,  Illinois,  1912 

given  a  greater  output  and  better  load  factor  and  which  would 
probably  be  a  very  close  estimate  to  the  actual  figures. 

Fig.  8  is  the  load  diagram  of  five  interurban  roads  in  North- 
ern Illinois.  The  annual  load  factor  is  47  per  cent.  The 
maximum  load  comes  on  a  summer  holiday. 

The  heavy  fluctuations  of  interurban  load  require,  in  case  of 
separate  power  plant  for  interurban  supply  only,  a  greater 


368  ADDRESSES  OF  SAMUEL  INSULL 

reserve  capacity  than  if  supplied  from  a  station  serving  several 
classes  of  business. 

The  total  kilowatt-hour  output  for  the  62  interurban  and 
street  railways  in  the  state,  outside  of  Chicago,  has  been 
estimated,  from  these  five  and  two  other  roads,  on  three  different 
bases  —  that  is,  per  passenger,  per  car-mile,  and  per  car  — 


Fig.  8.    Railway  Load  Diagram,  Illinois,  1912 

and  the  three  figure  out  very  closely.     The  total  curve  for  the 
state  has  been  prorated  from  these  curves,  using  this  output. 

Fig.  9  shows  a  water-pumping  load  diagram  of  three  North- 
ern Illinois  plants,  the  kilowatt-hours  per  thousand  gallons 
amounting  to  2.81.  You  will  see  that  the  maximum  comes 
in  the  summer,  and  it  is  possible  so  to  arrange  this  production 
that  it  is  practically  off-peak  business.  Most  of  the  small 


STATE-WIDE  SERVICE 


369 


water-pumping  plants  in  the  small  central  western  towns  pump 
to  a  reservoir  in  an  elevated  position,  so  that  the  question  of 
exactly  when  the  pumping  shall  take  place  is  not  a  serious 
matter,  except  in  case  of  fire.  As  a  rule,  that  class  of  busi- 
ness gives  a  load  factor  of  about  50.5  per  cent. 


Fig.  10  shows  a  diagram  of  an  ice-making  load  for  six 
plants  in  Chicago.  The  motors  installed  amount  to  2,424 
horse-power,  and  the  annual  load  factor  is  42.7  per  cent.  Con- 
tracts are  made  so  that  the  operations  shall  cease  at  the  time 
of  maximum  load  for  a  period  of  a  few  hours  per  day  for  four  or 
five  months  in  the  winter,  which  is  not  objectionable  in  that 
business.  The  reason  we  have  taken  these  six  plants  is  because 


370 


ADDRESSES  OF  SAMUEL  INSULL 


they  are  about  of  a  size  that  is  generally  used  in  the  small 
towns  throughout  the  state,  and  therefore  the  load  curves  would 
apply  equally  well  to  the  country  as  to  the  city. 

DRAINAGE  AS  A  CENTRAL-STATION  LOAD 
An  entirely  different  class  of  business  is   illustrated  by 
Fig.  11.    This  map  and  the  data  that  I  give  here  and  on  the 


12        2         4         6         8         10       12        2 

6 

R 

10       1 

1.800 
1,600 
1,400 
1,200 
1.000 

J.900 

1.600 

^J-t. 

-a 

~"1 

-IT 

AXIMU 

ul        S 

^"-1 

MMEP 

r^ 

,-n 

| 

J    L 

3t 

iT 

u 

DIAGRAM. 
OF 
ICE  MAKING  LOAD 
FOR  B  PLANTS  IN  CHICAGO 

MOTOSS    INSTALLED    I,4»«  K.P. 
ANNUAL     LOAD     MCTOd     <«.»% 

1,000 

t 

I 

| 

600 
400 

200 
0 

"X 

L 

j-i 

Jj 

3 

r 

1 

400 

200 
0 

^ 

-^ 

-LT| 

L 

"•-n' 

%r 

h. 

L 

'S 

a 

1^ 

_r 

1 

Fig.  10 

next  three  maps  or  diagrams  refer  to  the  Illinois  River  drain- 
age districts,  and  we  present  them  as  an  interesting  illustration 
of  the  use  of  electricity  from  a  transmission  system. 

Between  the  bluff  lines,  which  run  approximately  parallel  to 
the  river,  is  a  wide  flat  valley  which  is  subject  to  overflow  at 
times  of  high  water,  but  when  reclaimed,  by  building  dikes 


STATE-WIDE  SERVICE 


371 


372 


ADDRESSES  OF  SAMUEL  INSULL 


STATE-WIDE  SERVICE 


373 


around  suitable  areas  and  draining  and  pumping  out  the  sur- 
plus water,  extremely  fertile  land  is  made  available.  The 
load  factor  of  the  business  by  itself,  being  less  than  12  per  cent, 
does  not  warrant  the  installation  of  a  generating  and  trans- 
mission system  for  this  supply  by  itself,  but  when  combined 
with  other  uses  of  electricity  in  the  same  territory  it  is  valuable 


Fig.  13 

business,  as  it  is  altogether  off-peak.  A  cheap  power  supply 
should  greatly  accelerate  the  reclamation  of  swamp  and  over- 
flow land  throughout  the  country. 

Fig.  12  shows  in  detail  one  section  of  the  preceding  map. 
You  will  see  the  lines  of  the  bluffs  on  either  side,  and  the 
shaded  areas  are  the  various  districts  which  have  already  been 


374 


ADDRESSES  OF  SAMUEL  INSULL 


reclaimed  or  which  it  is  proposed  to  reclaim.  The  pumping 
station  is  always  located  at  the  best  point  in  the  district  to 
drain  all  the  land  and  to  return  the  water  to  the  river.  It  is 
quite  an  advantage  sometimes  to  locate  more  than  one  pump- 
ing station  in  a  district,  because  of  topographical  conditions 
involving  quicker  and  better  drainage.  This  is  perfectly 


7.5001 
6,750 
6,000 
5,250 
4.500 
3,750 
3,000 
2.250 
1  500 

22         4        is'       8        10       12       2 

6         8        10       12 

.«U,Uo, 

YEAH 

,„  sLo 

ESTIMATED  LOAD  DIAGRAM 

5,250 
4,500 
3,750 
3,000 
2,250 
1,500 
790 
> 



E 

I 

!: 

j 

[ 

\ 

_ 

1 

1 

\j 

,4 

S>/ 

\ 

I 

\\. 

C' 

l* 

\ 

N' 

j 

1 

t 

Fig.  14 

practicable  with  motor  drive,  while  it  is  usually  out  of  the 
question  to  build  two  steam  plants  in  the  same  district.  A 
co-operative  plant  and  transmission,  as  was  planned  for  the 
entire  district,  involves  an  expenditure  of  approximately 
$1,335,000,  while  a  public-utility  company,  with  transmission 
lines  practically  along  the  entire  valley,  in  order  to  supply  local 
towns,  can  take  care  of  this  same  business  at  an  expenditure  of 


STATE-WIDE  SERVICE 


375 


not  over  $411,000.  The  cost  of  co-operative  output  per 
kilowatt-hour  figures  at  least  three  cents  higher  than  the  cost  of 
supply  to  a  public-utility  company. 

The  monthly  variation  in  precipitation  and  energy  re- 
quirements is  shown  by  Fig.  13.  The  high  peak  there  is  partly 
owing  to  the  melting  of  the  winter  precipitation  stored  in  the 


40.00? 


15,000 


Fig.  15 

form  of  snow  and  ice,  and  partly  owing  to  high  water,  requiring 
greater  energy  to  pump  against. 

In  Fig.  14  is  given  an  estimated  load  diagram  of  the  drain- 
age business.  In  the  winter  days  it  is  not  an  important  matter. 
The  contracts  are  drawn  so  that  we  have  a  right  to  cut  off  the 
supply  for  a  period  of  three  hours,  and  consequently  it  becomes 
absolutely  an  off-peak  business. 


376  ADDRESSES  OF  SAMUEL  INSULL 

COAL-MINING   AND   OTHER   REQUIREMENTS 

The  coal-mining  load  (Fig.  15)  has  been  estimated  by  mining 
engineers  from  an  experience  dealing  with  the  whole  state  of 
Illinois  and  from  actual  load  diagrams  of  two  mines  which  are 
operated  largely  electrically.  These  data  indicate  about  1.G3 

!    10   12   2    4   6*   8   10   12 


32,000 


12.000 
8,000 
4.000 


ESTIMATED  LOAD  DIAGRAM 

RURAL  LIGHT   &   POWER 

TOTAL  FOR  ILLINOIS 


Fig.  16 

kilowatt-hours  at  the  mine  per  ton  of  coal  produced.  We 
applied  this  figure  to  the  total  tonnage  of  the  state,  which  is 
approximately  50,000,000  tons,  produced  by  845  mines.  Of 
these,  586  mines,  producing  about  5,000,000  tons,  are  eliminated 
as  local  mines  too  small  to  equip  electrically.  There  is  added 
the  estimated  load  for  some  forty  washing  and  re-screening 
plants,  and  then  transformer  and  line  losses.  The  load  factor 
for  the  individual  mines  figures  about  20  per  cent,  due  to  the 


STATE-WIDE  SERVICE  377 

fact  that  the  mines  are  operated  only  a  little  over  one-half  of 
the  number  of  days  per  year;  but  there  is  considerable  diversity 
between  the  mines,  as  one  day  a  mine  or  group  of  mines  shuts 
down,  and  another  day  some  others,  so  that  the  load  factor  for 
all  the  mines  is  brought  up  to  about  25.6  per  cent.  Further, 
the  diversity  is  large,  as  it  is  practically  off-peak  business,  the 
men  all  quitting  work  at  4  p.m.  and  being  out  of  the  mines  be- 
fore 4:30  p.m.,  that  being  earlier  than  the  average  evening 
load  for  other  purposes  in  the  territory. 

In  Fig.  16  is  shown  a  load  diagram  of  the  total  power  for 
rural  Illinois  based  on  2.5  kilowatt-hours  per  farm-acre  per 
year.  We  have  taken  the  Lake  County  figures  of  7.79  kilowatt- 
hours  per  farm-acre  and  cut  it  two-thirds,  so  as  to  be  absolutely 
safe  in  our  figuring.  The  Lake  County  figures,  to  my  mind  — 
as  we  had  only  two  years  to  make  any  development  —  are 
very  low  indeed,  and  I  believe  that  the  maximum  demand  for  an 
ordinary  farm  will  greatly  exceed  in  future  years  7.79  kilowatt- 
hours  per  acre,  so  that  we  cannot  go  very  far  wrong,  so  far  as 
minimum  possibilities  are  concerned,  if  we  take  one-third  of 
what  we  are  doing  and  assume  that  to  be  the  consumption  per 
farm-acre.  You  will  notice  the  load  factor  is  35  per  cent,  and 
that  the  maximum,  as  I  told  you  before,  comes  in  the  summer. 

ELECTRICAL  REQUIREMENTS  OF  THE  STATE  OF  ILLINOIS 

We  come  now  (Fig.  17)  to  the  marshaling  of  the  figures 
that  have  been  given  in  the  previous  curves.  We  take  the 
state  of  Illinois,  outside  of  Cook  County  and  outside  of  a 
small  suburban  district  in  Lake  County,  and  we  find  that  on 
the  lowest  possible  estimate  the  total  light  and  power  is  99,800 
kilowatts  on  December  18th.  The  interurban  and  street 
railways  used  81,500  kilowatts  on  a  summer  holiday,  when  their 
maximum  comes.  The  town  water-pumping  takes  29,290 
kilowatts  and  the  ice-making  16,575  kilowatts.  Coal  mining 
takes  38,530  kilowatts  between  4  and  4:30  p.m.  some  day  in 
November  or  early  in  December.  The  rural  light  and  power 
takes  33,125  kilowatts  in  the  summer.  Drainage  pumping  re- 


378 


ADDRESSES  OF  SAMUEL  INSULL 


quires  7,125  kilowatts  in  early  spring.  Thus  we  have  a  total 
of  305,945  kilowatts  if  you  disregard  altogether  the  time  at 
which  the  maximum  demand  comes. 

Now  the  generating  plants,  the  transmission  lines  and  the 
substations  have  to  be  designed  and  constructed  to  take  care 
of  the  maximum  demand  made  on  you  on  one  given  day  of  the 


V>o,ooo 


Fig.  17 

year,  which  is  the  day  on  which  you  get  the  highest  demand  from 
all  those  businesses  put  together.  With  a  separate  generating 
and  transmission  system  for  each  kind  of  supply,  you  have  got 
to  provide  the  investment  necessary  for  that  total  of  305,000 
kilowatts,  so  far  as  generation  and  primary  distribution  are 
concerned.  What  I  mean  by  primary  distribution  is  the 
transmission  lines  that  go  through  the  country  to  substations, 
which  transmission  lines  are  operated  at  relatively  high  pressure, 


STATE-WIDE  SERVICE 


379 


the  pressure  being  reduced  at  the  substations  where  the  energy 
enters  the  local  distribution  system. 

Fig.  18  tells  the  story,  graphically,  of  the  saving  effected. 
The  town  light-and-power  load  comes  about  5 :30  on  Decem- 
ber 18th.  The  demand  of  the  interurban  and  street  railways, 
which  is  81,500  kilowatts  in  the  middle  of  summer,  is  down  to 


300,000 


TOTAL  LOAD   DIAGRAM 
ILLINOIS  EXCLUSIVE     OF    COOK    COUNTY 
DAY   OF    COMBINED   YEARL 
5.30P.M.  DEC. 


Fig.  18.    Utilization  of  Diversity  on  a  State-wide 
Scale 

78,460  on  December  18th.  The  town  water  and  pumping  is 
down  from  29,290  kilowatts  in  the  middle  of  summer  to  17,430 
kilowatts  on  the  day  of  your  maximum  load.  Ice-making  goes 
down  from  16,575  in  the  middle  of  summer  to  245  in  the  middle 
of  winter;  coal  mining  from  38,530  at  the  time  of  its  maximum 
demand  for  energy  to  4,975  at  the  time  of  your  maximum  load 
in  winter.  The  rural  light-and-power  load  of  33,125  in  the  sum- 


38C  ADDRESSES  OF  SAMUEL  INSULL 

mer  goes  to  24,990  on  the  day  of  your  maximum  load.  Drain- 
age pumping  load  of  7,125  kilowatts  in  early  spring  is  entirely 
off  at  the  time  of  your  maximum  load  in  winter,  and  the  305,945 
kilowatts  of  total  demand,  irrespective  of  the  time  when  that 
demand  comes,  is  reduced  to  an  instantaneous  demand  of 
225,900  kilowatts,  or  a  difference  of  80,045  kilowatts,  or,  to 
express  it  otherwise,  a  diversity  of  35.4  per  cent. 

There  is  one  set  of  figures  that  we  have  left  out  of  these 
estimates.  I  refer  to  the  amount  of  energy  that  would  be 
required  if  the  steam  trunk-line  roads  of  Illinois  were  electrified. 
I  presume  that  when  the  time  comes  for  electrification  in  the 
Central  West  it  will  follow  somewhat  the  same  course  that  is 
being  followed  in  the  East.  The  passenger  terminals  will 
probably  be  electrified  first,  because  they  seem  to  be  the 
simplest  to  deal  with.  Then  will  follow  the  freight  terminals, 
and  it  will  probably  be  quite  a  number  of  years  before  we  get  to 
a  point  where  steam  electrification  will  take  place  generally. 
It  will  probably  take  place  east  of  the  Alleghenies  long  before  it 
takes  place  in  the  Mississippi  Valley,  because  of  the  density  of 
travel  and  movement  of  freight,  and  owing  to  density  of  popu- 
lation, which  is  so  much  greater  east  of  the  Alleghenies  than  it 
is  in  the  Mississippi  Valley.  But  when  the  time  comes,  as 
surely  it  must  come,  for  the  electrification  of  the  great  arteries  of 
travel  of  the  country,  the  economical  way  for  the  railroads  to 
get  their  energy  will  be  to  get  it  from  these  plants  that,  in  my 
judgment,  will  be  spread,  by  that  time,  all  over  the  states,  with 
their  transmission  lines  gridironing  the  various  states  and 
carrying  cheap  energy  to  the  smallest  communities,  thus 
changing  entirely  the  basis  of  living,  and  giving  less  reason  for 
great  accumulations  of  population  for  manufacturing  purposes 
in  given  centers  because  of  the  incentive  of  cheap  power,  which 
will  not  be  confined  to  those  centers,  but  will  be  available 
equally  in  small  communities  and  in  large  communities.  I 
very  much  doubt  whether  the  conditions  of  load  shown  in  the 
last  two  charts  would  be  changed  if  all  the  steam  railroads 
in  Illinois  were  run  electrically,  except  that  the  condition  of 
diversity  would  probably  be  increased,  and  consequently  the 


STATE-WIDE  SERVICE 


381 


condition  of  operation  would  probably  be  improved  and  the 
cost  of  energy  would  be  reduced,  even  beyond  any  figures  I 
can  show  you  tonight. 


TABLE  IV.— SUMMARY  FOR  YEAR 


Kw.  Hours 

Maximum  Kw. 

Diversity 

Load 
factor 

Amount 

Per  cent 
of  total 

For 
year 

5:30  p.m. 
Dec.  18 

Amount 

Per 
cent 

Light  and  power  
Interurban  and  street 
railway  
Water  pumping  
Ice-making  
Coal  mining  
Drainage  pumping.  .  .  . 
Farming  

Totals  

238,717,500 

334,996,600 
129,562,500 
62,126,300 
86,571,500 
7,250,000 
101,562,500 

24.9 

34.8 
13.4 
6.5 
9.0 
0.8 
10.6 

99,800 

81,500 
29,200 
16,575 
38,530 
7,125 
33,125 

99,800 

78,460 
17,430 
245 
4,975 

24',990 

3,040 
11,860 
16,330 
33,555 
7,125 
8,135 

35.4 

27.3% 

47.0% 
50.6% 
42.7% 
25.6% 
11.6% 
35.0% 

960,786,900 

100.0 

305,945 

225,900 

80,045 

35.9% 

Load  factor  of  combined  systems  48.7%. 

Table  IV  sums  up  in  figures  what  you  have  seen  on  the 
diagrams.  It  would  seem  to  indicate  —  and  I  am  rather 
inclined  to  think  it  is  a  low  estimate  —  that  the  total  amount  of 
energy  that  could  be  disposed  of  at  this  time  for  the  purpose  of 
light  and  power,  interurban  street  railways,  water  pumping, 
ice-making,  coal  mining,  drainage,  and  general  farm  purposes  in 
the  state  of  Illinois,  outside  of  Chicago,  is  about  960,000,000 
kilowatt-hours,  or  about  one-fifth  greater  than  the  present  out- 
put of  the  city  of  Chicago.  The  maximum  load  would  be 
225,000  kilowatts  combined,  as  against  305,000  with  them 
separated,  or  slightly  less  than  the  Chicago  maximum. 

The  last  column  of  Table  IV  shows  you  the  load  factor  of 
all  these  businesses  separately.  The  combined  load  factor 
of  the  entire  system  is  48.7,  which  is  better  than  is  obtained,  so 
far  as  I  am  aware,  in  any  large  center  of  population  in  the  world, 
and  with  an  amount  of  output  which,  as  I  have  stated,  exceeds 
by  one-fifth  the  largest  output,  so  far  as  I  am  aware,  in  any 
large  center  of  population  in  the  world. 

Table  V  shows  the  reserve  capacities,  etc.  I  have  had 
these  figures  prepared  to  show  you  the  enormous  reserve  that 
small  plants,  as  a  rule,  carry  in  Illinois.  In  Northwestern 
Illinois  they  have  78.5  per  cent  reserve;  in  Central  Illinois  they 
have  82.9  per  cent  reserve,  or  with  69  towns  and  182,000  popu- 


382  ADDRESSES  OF  SAMUEL  INSULL 

lation  and  a  maximum  demand  of  8,210  kilowatts  they  have  a 
capacity  of  14,600  kilowatts,  being  a  reserve  of  78  per  cent. 
And  yet  the  service  under  these  circumstances  is,  as  most  of 
you  know,  very  unreliable  in  small  towns. 


TABLE  V. — LARGE  RESERVE  CAPACITY 
In  Local  Plants 


Number  of  towns  for  which  information  is 

available 

Population 

Maximum 

Capacity 

Per  cent  reserve 


North- 

North- 

eastern 

western 

Central 

Illinois 

Illinois 

Illinois 

Total 

6 

16 

47 

69 

6,885 

34,459 

141,376 

182,720 

415 

1,897 

5,898 

8,210 

475 

3,385 

10,779 

14,639 

14.5 

78.5 

82.9 

78.4 

TABLE  VI. — ESTIMATED  SAVING  IN  PLANT  INVESTMENT 


Maximum  Kw. 
as  separate 
systems 


Light  and  power 

Intel-urban  and  street  railway 81,500 

Water  pumping 29,290 

Ice-making 16,575 

Coal  mining 38,530 

Drainage  pumping 7,125 

Farming 35,125 


Estimated 

percentage         Estimated 
reserve          requirement 

149,700  kw. 

114,100 
43,940 
21,550 
57,800 
10,690 
39,750 


Totals... 


305,945 


43% 


Estimated  requirement,  437,530  kilowatts  at  $100  per  kilo- 
watt   

Maximum  kilowatts  for  above  as  combined  system 

Plus  20  per  cent  reserve 


437,530  kw. 


$43,753,000 

225,900  k\ 
45,180 


Total  estimated  requirement,  for  combined  system. . .  271,080  kw. 

Estimated  requirement,  271,080  kilowatts  at  $75  per  kilo- 
watt       $20,331,000 


Estimated  saving. 


$23,422,000 


Table  VI  shows  the  estimated  saving  in  plant  investment. 
I  have  had  this  statement  prepared,  giving  a  comparison  of 
the  generating-plant  cost  for  separate  plants  and  for  unified 
systems.  The  saving  shown  cannot  be  made  except  for  new  or 


STATE-WIDE  SERVICE  383 

additional  business,  and  as  the  old  plants  are  displaced  on 
account  of  wearing  out.  However,  with  the  rapid  growth  of 
all  these  classes  of  business,  this  investment  saving  can  be  made 
in  a  few  years,  in  addition  to  an  enormous  operating  saving. 

We  are  assuming  that  these  plants  with  an  estimated 
capacity  of  437,530  kilowatts  are  put  in  as  separate  plants, 
costing  $43,753,000. 

The  maximum  kilowatts  for  the  combined  system  would  be 
225,900.  With  20  per  cent  reserve  rating,  which  is  ample, 
the  total  rating  is  271,080  kilowatts,  which  at  $75  per  kilo- 
watt is  $20,331,000,  showing  an  estimated  saving  of  $23,422,000. 

These  figures  are  somewhat  misleading  to  begin  with.  You 
could  not  handle  that  amount  of  business  in  the  state  of  Illinois 
in  small  plants  at  $100  per  kilowatt.  The  operating  expenses 
of  those  small  plants  would  be  so  great  that  it  would  be  im- 
possible to  quote  a  price  that  would  enable  you  to  get  the 
business,  so  that  in  a  way  you  would  say  that  would  be  an  im- 
possibility. It  would  be  impossible  to  raise  the  money  because 
you  would  be  quite  unable  to  make  a  showing  with  a  series  of 
separate  plants.  I  do  not  know  how  many  plants  there  would 
be,  but  they  would  run  up  into  the  hundreds.  The  only  way 
to  give  cheap  energy  to  a  large  rural  community,  whether  it  be 
to  the  manufacturing  interests  in  those  communities  or  for 
the  necessities  of  the  people,  such  as  ice-making,  or  for  mining 
of  coal,  or  for  the  performance  of  public  functions,  such  as  water 
supply  —  the  only  possible  way  that  it  can  be  carried  out  is  by 
concentrated  production,  which  would  call  for  the  investment 
of  $20,331,000  in  stations. 

To  go  into  the  matter  of  operating  saving  from  that  class 
of  combination  is  almost  beside  the  question,  as  that  business 
can  only  be  secured  by  a  unified  system  of  production  having 
low  investment  cost  in  proportion  to  the  load  factor,  and  low 
operating  cost  in  proportion  to  the  load  factor.  To  try  to 
compare  that  with  the  costs  of  many  little  local  plants,  worth- 
less in  themselves  except  for  supplying  a  few  lines  in  their 
own  various  communities,  would  not  be  of  any  particular 
advantage  to  us  in  looking  into  this  subject,  because  the 


384  ADDRESSES  OF  SAMUEL  INSULL 

figures  I  would  have  to  show  would  be,  in  a  way,  misleading, 
as  I  would  have  to  assume  that  it  would  be  possible  to  get  the 
class  and  amount  of  business  with  the  operation  of  small  isolated 
plants  that  can  only  be  obtained  by  a  unified  system  of  produc- 
tion. 

CENTRALIZATION  VERSUS  MUNICIPALIZATION 

The  figures  I  have  presented  you  show  absolutely  that  the 
business  in  which  I  am  engaged  can  be  run  —  successfully  run  — 
only  as  a  monopoly.  To  use  the  taxpayers'  money  in  putting 
in  a  small  lighting  plant  —  in  using  the  word  "small"  I  speak 
relatively,  meaning  "small"  as  applied  to  towns  with  a  popula- 
tion of  500  to  1000,  and  "small"  as  applied  to  a  city  of  possibly 
one  million  or  two  million  population,  for  what  is  small  in  one 
place  would  be  relatively  large  in  another  place;  but  they  are 
all  equally  small  in  total  business  obtained  in  any  given  center 
of  population  —  to  put  the  taxpayers'  money  into  that  class 
of  investment,  whether  it  is  in  a  little  Illinois  village  or  a 
large  city  in  New  Jersey  or  New  York,  is  simply  a  waste  of 
money.  While  I  do  not  wish  to  enter  into  a  discussion  of  any 
controversial  character  in  an  assemblage  of  this  kind,  I  do  not 
know  of  any  greater  argument  against  the  municipalization  of 
the  production  of  energy  than  the  study  of  the  economics  of 
the  business  in  which  I  am  engaged.  A  study  of  such  figures 
as  those  I  have  brought  to  your  attention  must  lead  any  man  of 
ordinary  intelligence,  not  necessarily  with  technical  experience, 
but  any  man  with  ordinary  intelligence,  to  the  conclusion  that 
the  only  possible  way  to  operate  the  business  of  energy  produc- 
tion and  distribution  is  by  operating  it  as  a  monopoly  in  so 
much  of  the  territory  as  you  may  want  to  serve  from  one 
organization.  It  does  not  necessarily  follow  that  that  organi- 
zation shall  cover  the  whole  of  a  state  or  the  whole  of  a  county, 
provided  the  county  is  large  enough  for  more  than  one  utility. 
It  does  follow,  however,  that  so  far  as  any  particular  piece  of 
territory  is  concerned,  whether  the  energy  produced  be  used 
for  operating  urban  transportation,  such  as  the  surface  lines 
and  the  underground  lines  and  the  elevated  lines  in  a  city  like 


STATE-WIDE  SERVICE 


385 


-*,—  -  T  — Dv,:i7  -  -  Tsszrnxzs-tszzz  -r 
l4k§™"H™*ra/M™H  •«"«""  <f  J*  L 

— I   . Lj      --C>   i\v. 

A   BI,.O«O«  >-Jr-H "—i — — rr r\\% 


ILLINOIS 


TOWNS  OVER  500 
WITHOUT    ELECTRIC 


N-umber  of  to< 

Population 119,200 

Population   per  town 660 


Fig.  19.     Map  Showing  Conditions  Early  in  1913 


ADDRESSES  OF  SAMUEL  INSULL 


TOWNS  WITH   ELECTRIC    SERVICE 
UNDER    LOCAL    MANAGEMENT 

Number  of  towns _.219 

Population  __ 452,400 

Population  per  town..  .,2.070 


Fig.  20.   Map  Showing  Conditions  Early  in  1913 


STATE-WIDE  SERVICE 


387 


ILLINOIS 

TOWNS  WITH  24    HOUR  ELECTRIC    SERVICE 

UNDER  GROUP  UTILITY    MANAGEMENT 

Number  of  towns  326 

Population  1,114,000 

Population  per  town  3,420 


Fig.  21.    Map  Showing  Conditions  Early  in  1913 


388 


ADDRESSES  OF  SAMUEL  INSULL 


Philadelphia,  or  a  portion  of  the  terminal  lines,  or  the  main 
lines  of  the  steam  railroads  centering  in  Philadelphia,  or  the 
lighting  of  your  streets,  or  for  supplying  the  thousand  and  one 
purposes  that  a  community  like  this  requires  it  for,  such  pro- 
duction and  distribution  of  energy  must,  for  reasons  of  econ- 
omy, be  a  centralized  one,  whether  such  centralization  be  con- 
fined to  the  city  or  the  county,  or  possibly  covering  a  large 
portion  of  the  state. 

Let  us  consider  for  a  moment  the  remaining  maps  and 
diagram,  which  may  interest  you. 

Fig.  19  is  a  map  of  Illinois  showing  towns  of  over  500  popu- 
lation which  are  without  electric  service,  and  in  addition  there 
is  the  rural  district  that  is  not  served  at  all.  Fig.  20  is  a  map 
showing  all  of  the  towns  in  the  state  which  have  service  from 
local  plants  owned  and  operated  by  local  companies,  and  which, 
in  a  majority  of  cases,  is  only  a  six-hour  or  ten-hour  service. 
There  are  219  of  these  towns,  of  which  19  have  a  population  of 
less  than  500.  Fig.  21  is  a  map  showing  all  the  towns  in  the 
state  in  which  the  electric  serv- 
ice is  owned  and  operated  by 
some  group  utility,  which  serv- 
ice is  being  rapidly  intercon- 
nected with  and  operated  from 
the  most  economical  available 
source  of  supply. 

Fig.  22  shows  graphically 
the  present  electric  service  of 
the  state  of  Illinois,  exclusive 
of  Cook  County,  analyzed  ac- 

,,.     .  ,     cording  to  population,  showing 

Fig.  22.      Electric-Service  Analysis     .,     .  «.  ,  .  , 

of  Illinois  in  1912  th&t    portion    which    has    no 

electric    service,    that    portion 

which  has  service  from  local  plants,  and  that  portion  of  the 
population  which  has  service  from  some  utility  group.  It 
brings  out  the  fact  that  a  little  over  half  of  this  population 
is  still  without  service.  In  statistical  form  the  facts  expressed 
in  Fig.  22  are  as  follows: 


STATE-WIDE  SERVICE  389 

Per  cent 

Towns  Population  of  total 

Supplied  by  utility  groups 326  1,114,000  34 . 2 

Supplied  by  local  plants 219  452,400  13.8 

Towns  without  service  of  over  500  population .         180  119,200  3.6 

Towns  without  service  of  under  500  population      1,713  2ie',300  6.5 

Rural 1,366,100  41.8 


Total 2,438        3,268,000       100.0 

At  this  point  I  want  to  say  that  it  would  have  been  im- 
possible for  me  to  prepare  any  such  statistics  and  curve  sheets 
as  I  have  shown  you  if  I  had  not  had  at  my  command  the  de- 
voted service  of  a  large  staff  of  statisticians,  ably  headed  by 
Mr.  Edwin  J.  Fowler,  chief  statistician  of  the  Commonwealth 
Edison  Company,  and  Mr.  George  E.  McKana,  assistant 
chief  statistician.  I  think  it  is  only  fair  that  I  should,  in  this 
public  way,  refer  to  the  great  service  they  have  rendered  me, 
and  also  the  service  rendered  by  the  officers  of  the  various 
companies  which  it  is  my  privilege  to  operate,  in  the  preparation 
of  the  data  that  I  am  using  before  you  this  evening. 

WHAT  MAY  BE  ACCOMPLISHED  IN  PENNSYLVANIA 

But  you  people  in  this  part  of  the  country  are  a  good  deal 
more  interested  in  Pennsylvania  —  that  is,  on  this  side  of  the 
Alleghenies  —  than  you  are  in  Illinois,  which  is  some  distance 
the  other  side.  The  figures  I  have  given  you  are  not  merely 
theoretical  figures;  they  are  figures  that  have  been  prepared  in 
connection  with  the  operation  of  businesses  employing  a  very 
large  amount  of  capital,  which  businesses  have  been  organized 
for  exactly  the  purposes  which  we  have  set  forth  as  hoping 
to  accomplish  in  the  diagrams  shown  this  evening.  We  be- 
lieve that  every  corner  of  this  country  where  density  of  popula- 
tion justifies  it  must  have  in  the  next  few  years  a  general  cen- 
tral-station supply  of  electrical  energy  for  the  general  use  of  the 
people  living  in  the  small  towns  and  the  farming  districts  of  the 
country.  When  I  speak  of  density  of  population  being  a  pri- 
mary necessity,  I  probably  exclude  most  of  the  territory  lying 
west  of,  say,  the  center  of  the  Mississippi  Valley  until  you  get 
across  the  Sierra  Nevada  Mountains  and  reach  the  wonderfully 


390  ADDRESSES  OF  SAMUEL  INSULL 

productive  territory  of  the  Pacific  Coast,  extending  practically 
from  the  Arctic  Circle  to  the  borders  of  Mexico. 

In  the  territory  east  of  the  center  of  the  Mississippi  Valley 
it  is  not  only  possible,  but  it  is  practically  certain,  that  we  shall 
see  in  the  next  few  years  an  opportunity  to  get  cheap  electrical 
energy  alike  in  the  country  community  and  in  the  large  city. 
Just  see  what  that  means  for  a  state  like  Pennsylvania.  You 
have  the  advantage  of  low  cost  of  production  from  the  large 
steam-generating  plants  of  the  two  large  cities  of  Philadelphia 
and  Pittsburgh  at  practically  opposite  ends  of  this  great  state; 
you  have  a  density  of  population  of  171  per  square  mile,  as 
compared  with  101  in  Illinois.  If  you  eliminate  cities  of  over 
100,000  population,  you  have  a  density  of  122  per  square  mile, 
as  against  62  in  Illinois.  Or  take  your  neighbor  state,  New 
Jersey,  which  has  a  density  of  population  more  than  three  times 
as  great  as  that  of  Illinois,  and  if  you  will  leave  out  the  cities  of 
over  100,000  population  it  has  a  density  of  almost  four  times 
that  of  the  state  of  Elinois.  So  that  what  is  possible  for  us  on 
the  other  side  of  the  Alleghenies  is  certainly  equally  possible 
for  you  people  on  the  Atlantic  seaboard. 

To  come  back  to  Pennsylvania.  Besides  having  the  ad- 
vantage of  economical  production  at  two  ends  of  the  state 
in  very  large  centers  of  population,  you  have  probably  a  million 
horse-power  in  water-power  in  the  state.  You  have  untold 
wealth  hi  mines.  I  cannot  see  why  it  should  not  be  cheaper  to 
transport  energy  the  short  distance  that  it  would  have  to  be 
transported  to  some  of  the  large  centers  of  population  in  Penn- 
sylvania than  to  spend  the  money  in  transporting  coal  on  the 
railroad. 

If  it  is  possible  to  achieve  anything  like  the  cheap  production 
of  energy  that  a  general  unified  system  would  bring  about 
in  the  country  districts,  as  comparable  with  the  prices  paid 
for  energy  in  large  centers  of  population,  what  a  difference  it 
would  mean  to  our  working  population !  The  manufacturer  has 
to  go  where  he  can  get  cheap  raw  material  and  where  he  can 
call  on  a  large  labor  market.  Still,  there  are  many  industries 
which  can  be  developed  in  the  center  of  a  farming  district, 


STATE-WIDE  SERVICE  391 

where  the  farming  population  can  be  called  upon  to  labor  when 
they  are  not  employed  on  the  land.  To  my  mind  there  is  no 
more  important  factor  in  the  great  problems  of  life,  the  problem 
of  how  the  workingman  can  get  fresh  air,  the  problem  of  how 
he  can  bring  up  his  family  in  healthy  localities,  than  the  proper 
solving  of  the  problem  of  the  economical  generation  and  dis- 
tribution of  energy  for  country  districts. 

I  think  it  was  Lord  Macaulay  who  made  the  statement  that 
"of  all  inventions,  the  alphabet  and  the  printing  press  alone 
excepted,  those  inventions  which  abridge  distance  have  done 
most  for  civilization."  Lord  Macaulay  died  before  the  open- 
ing of  the  electrical-energy  era.  I  think  if  he  were  living  today, 
he  would  have  had  in  mind  among  the  inventions  which  have 
abridged  distance  not  only  the  telegraph  and  telephone,  but 
he  would  add  inventions  that  have  enabled  us  to  carry  energy  for 
the  use  of  men  at  remote  distances,  in  small  towns  and  country 
districts.1 

1.  It  may  be  of  interest  to  mention  here  that  in  1914  Mr.  Insull  founded 
the  Franklin  Medal,  to  be  awarded  from  time  to  time  by  the  Franklin 
Institute  "to  those  workers  in  physical  science  or  technology,  without  regard 
to  country,  whose  efforts  have,  in  the  judgment  of  the  Institute,  done  most 
to  advance  a  knowledge  of  physical  science  or  its  applications."  The  medal 
is  of  gold  and,  besides  suitable  inscriptions,  bears  a  medallion  of  Benjamin 
Franklin  made  from  the  portrait  by  Thomas  Sully. 


INFLUENCE   OF   ENGINEERING   ON 
MODERN  CIVILIZATION1 

FRANCIS  BACON,  speaking  three  centuries  ago,  made 
this  statement:  "There  are  three  things  which  make 
a  nation  great  and  prosperous  —  a  fertile  soil,  busy 
workshops,  and  easy  conveyance  for  man  and  goods  from  place 
to  place."  Half  a  century  ago  Lord  Macaulay  said,  in  effect: 
"The  inventions  which  have  bridged  distance  have  done  most 
for  civilization."  The  work,  or  the  inventions,  of  the  engineers 
during  the  whole  of  the  last  century  —  the  nineteenth  century  — 
and  during  the  latter  years  of  the  eighteenth  century  were  in 
the  direction  of  bridging  distance.  If  you  take  the  fundamen- 
tal working  invention  of  the  steam  engine  by  James  Watt 
in  the  latter  end  of  the  eighteenth  century,  you  have  one  of 
the  fundamental  elements  that  led  to  such  enormous  mechanical 
developments  during  the  whole  of  the  nineteenth  century. 
Another  instance  is  the  work  of  Robert  Fulton  in  connection 
with  the  steamboat  in  the  early  part  of  the  nineteenth  century. 
Yet  another  instance  is  the  work  of  George  Stephenson,  who 
engineered  and  operated  the  first  real  steam  railroad  ever  con- 
structed, the  Stockton  and  Darlington  Railroad  in  England, 
towards  the  end  of  the  first  quarter  of  the  nineteenth  century. 
The  introduction  of  gas,  I  think  about  1815,  was  an  impor- 
tant contribution  by  engineers  to  the  development  of  modern 
civilization.  Morse's  work  in  connection  with  the  electric 
telegraph  in  this  country  and  the  work  of  Cooke  and  Wheat- 
stone  in  Great  Britain,  towards  the  end  of  the  third  decade  of 
the  nineteenth  century,  have  probably,  in  conjunction  with 
the  development  of  the  steam  engine  and  the  steam  railroad,  had 

1.  An  address  delivered  at  Urbana,  111.,  on  May  8,  1913,  on  the  occasion 
of  the  dedication  of  the  Transportation  Building  and  the  Locomotive  and 
Mining  Laboratories  of  the  University  of  Illinois. 

392 


INFLUENCE  OF  ENGINEERING  393 

a  greater  effect  on  the  development  of  civilization  than  almost 
any  other  contributions  by  engineers  of  the  last  century.  This 
was  followed  up,  soon  after  the  middle  of  the  last  century,  by 
the  coupling  of  the  two  great  English-speaking  peoples  by  means 
of  the  submarine  Atlantic  cable.  This  achievement  was  one 
of  the  great  factors  that  have  led  hi  more  recent  years  to  a 
better  understanding  between  those  two  great  peoples.  From 
the  time  of  the  successful  commercial  establishment  of  the 
submarine  cable  to  the  discovery  by  Alexander  Graham  Bell 
of  the  principles  underlying  the  commercial  telephone  of  today 
was  but  a  short  period  —  I  think  but  little  over  a  decade.  This 
was  followed  about  the  year  1879-1880  by  the  rapid  develop- 
ment of  the  electric  light  and  power  industry  and  the  general 
use  of  electrical  energy.  My  first  recollection  of  seeing  an 
electric-lighted  street  goes  back  to  London,  where,  about  the 
end  of  1878,  the  Thames  Embankment  was  lighted  by  arc  lamps, 
utilizing  a  Russian  invention  called  Jablochkoff  candles. 
While  that  exhibition  was  going  on  in  Europe  there  were  a 
number  of  able  engineers  and  inventors  engaged  in  the  develop- 
ment of  the  electrical  industry  here  in  this  country.  Brush, 
Elihu  Thomson,  Edwin  J.  Houston,  Edward  Weston,  George 
Westirighouse,  Frank  J.  Sprague  and  many  others  represented 
the  engineering  intellect  which  was  devoted  to  the  develop- 
ment of  electrical  industry  in  this  country,  headed  especially 
by  the  work  and  invention  of  Thomas  A.  Edison,  who  is  en- 
titled to  the  credit  of  devising  the  electrical  distribution  sys- 
tem as  it  is  understood  today. 

I  have  mentioned  just  a  few  names  connected  with  en- 
gineering development;  I  might  go  on  all  evening  in  speaking  of 
the  personal  work  of  various  men;  but  time  will  not  permit. 
There  is  just  one  other  man,  however,  to  whom  it  is  fitting  to 
refer  —  Mr.  Marconi,  whose  marvelous  invention  of  the  wire- 
less telegraph  has  practically  annihilated  space. 

WHAT   TRANSPORTATION  FACILITIES  MEAN  TO  CIVILIZATION 

How  have  these  great  accomplishments  of  the  world's 
inventors  and  engineers  benefited  civilization?  Great  systems 


394  ADDRESSES  OF  SAMUEL  INSULL 

of  transportation  have  been  created  ashore  and  great  vessels 
afloat,  connecting  the  several  continents  which  border  the  great 
oceans  of  the  globe.  Surely  an  abridgment  of  distance,  as 
Lord  Macaulay  put  it,  has  been  achieved  by  the  work  of  these 
men.  If  "conveyance  for  man  and  goods  from  place  to  place" 
is  one  of  the  great  elements  in  developing  a  people,  surely  the 
engineers  who  have  contributed  so  much  to  the  industrial  de- 
velopment of  the  last  century  may  be  crowned  as  empire  build- 
ers. The  work  of  the  great  transportation  agencies  has  made 
possible  the  great  manufacturing  establishments  of  Illinois, 
whose  products  far  exceed  the  combined  product  of  the  agricul- 
tural and  mining  industries  of  the  state.  Their  work  has  de- 
veloped the  manufacturing  industries  of  the  East  by  trans- 
porting the  raw  materials  of  the  West  and  of  the  South.  They 
have  doubled  in  value  the  producing  territory  of  the  Mississippi 
Valley  by  bringing  its  farmers,  and  later  its  manufacturers, 
into  touch  with  the  markets  of  the  world.  The  inhabitant, 
whether  he  be  a  trader  or  whether  he  be  following  any  other 
occupation  today  —  whether  he  lives  in  the  Occident  or  the 
Orient  —  is  alike  under  everlasting  obligation  to  the  engineers 
who  have  developed  the  great  transportation  systems  ashore 
and  afloat.  Take  the  mere  question  of  the  abridgment  of 
distance.  London  is  today  nearer  to  Urbana  than  Detroit 
was  seventy-five  or  a  hundred  years  ago.  Pekin  is  today 
within  easier  reach  of  Champaign  than  New  York  was  a  com- 
paratively short  time  back. 

If  distance  has  been  bridged  by  the  transportation  engineers; 
if  with  their  assistance  and  the  courage  and  valor  of  the  pioneers 
the  forests  and  prairies  have  been  turned  into  great  producing 
farm  lands,  surely  the  telegraph  and  the  telephone  have  pro- 
duced an  abridgment  of  time  that  would  have  seemed  the  im- 
possible hope  of  the  dreamer  a  hundred  years  ago.  The  tele- 
graph and  telephone,  especially  the  telegraph,  have  made  the 
world  of  nations  next-door  neighbors.  The  civilizing  influence 
of  contact,  the  impossibility  of  isolation,  the  knowledge  of 
what  is  going  on  the  world  over  and  the  change  that  such 
knowledge  must  produce  in  one's  point  of  view,  the  effect  of 


INFLUENCE  OF  ENGINEERING  395 

such  knowledge  on  the  development  of  our  race,  are  all  mat- 
ters that  must  be  traced  more  or  less  to  the  work  of  the  in- 
vestigator and  the  engineer  in  the  invention  and  development 
of  our  great  schemes  of  communication,  either  by  telegraph  or 
by  telephone,  local  or  international. 

CHEAP  ELECTRICAL  ENERGY  FOR  RURAL  COMMUNITIES 

The  development  of  the  business  of  the  generation  and  dis- 
tribution of  electrical  energy  will  probably  have,  within  the  next 
quarter  of  a  century,  very  great  influence  on  the  development  of 
our  local  communities,  not  alone  the  large  cities  but  our  rural 
communities  throughout  our  states  wherever  there  is  any  con- 
siderable density  of  population.  Heretofore  the  business  of 
producing  and  distributing  electricity  on  an  economical  basis 
has  been  confined  very  largely  to  our  large  cities;  but  the  mar- 
velous works  of  our  engineers  during  the  last  two  decades  —  the 
great  changes  that  have  taken  place  in  connection  with  the 
development  of  prime  movers,  the  changes  from  the  recipro- 
cating engine  to  the  steam  turbine,  the  changes  in  use  of  units 
of  30,000  horse-power  in  place  of  units  of  5,000  horse-power  — 
are  producing  reductions  in  the  cost  of  the  energy  which  will 
lead  to  the  centralization  of  production  and  distribution  over 
wide  areas  in  the  interest  of  economy.  This  will  be  done 
in  the  interests  of  low  cost  to  producer  and  low  price  to  the 
consumer,  and  this  centralization  must  have  a  very  great 
effect  in  the  development  of  the  industrial  interests  of  such  states 
as  Illinois.  It  is  today  not  only  a  possibility  but  an  actuality 
that  the  same  advantages  that  we  enjoy  in  large  communities 
can  also  be  enjoyed  by  the  farmer,  by  the  rural  community, 
by  people  having  large  areas  of  land  to  drain  and  by  others. 
The  same  privileges  of  low  cost  of  energy  can  be  obtained  for 
them  as  are  obtained  for  the  users  of  energy  in  the  large  centers 
of  population. 

If  you  will  trace  back  the  development  of  the  large  manufac- 
turing centers  in  this  country,  the  early  manufacturing  centers, 
you  will  find  that  the  workshop  and  the  mill  were  established 


396  ADDRESSES  OF  SAMUEL  INSULL 

where  cheap  power  could  be  obtained.  Until  the  last  few  years 
the  only  places  where  cheap  power  could  be  obtained  were  on 
streams  where  hydraulic  development  was  possible.  The 
great  manufacturing  establishments  of  New  England  owed 
their  foundation  largely  to  this  cause.  Suppose  any  very 
small  community  anywhere  in  the  thickly  populated  territory 
of  the  Mississippi  Valley  is  able  to  obtain  energy  for  manufac- 
turing purposes  at  low  cost.  Assuming  that  in  that  community 
the  manufacturer  can  obtain  the  necessary  labor;  then  it 
stands  to  reason  that  one  of  the  great  troubles  of  modern  life 
will  be  solved  by  cheap  energy. 

SOCIOLOGICAL  ASPECTS  OF  CHEAP  ENERGY  IN  RURAL  LIFE 

At  the  present  time  large  manufacturing  interests  as  a  rule 
cluster  around  large  centers  of  population.  The  reason  for 
that  is  that  power  is  relatively  cheap  where  the  manufacturers 
have  a  large  population  to  draw  on  for  labor.  But  as  this  state 
and  other  surrounding  states  become  studded  with  manufac- 
turing establishments  the  necessity  which  compels  the  work- 
man to  dwell  in  large  centers  of  population,  where  living  con- 
ditions are  most  unfavorable,  will  cease.  He  will  be  able  to 
establish  himself  under  conditions  where  he  can  get  healthful 
environment  for  his  family.  Instead  of  living  in  overheated, 
ill-ventilated,  small  tenements  of  the  big  city  he  will  have  the 
opportunity  to  establish  himself  practically  amid  the  desirable 
conditions  that  those  living  in  the  country  ordinarily  enjoy. 
Surely  if  this  can  be  accomplished,  if  the  living  conditions  of  our 
people  can  be  improved,  if  their  children  can  be  brought  up 
under  circumstances  which  will  give  them  the  foundation  of 
good  health,  which  will  give  them  the  opportunity  of  associa- 
tion in  our  country  schools  with  that  portion  of  the  population 
—  the  farming  population  —  which  is  the  very  backbone  of  the 
country,  it  is  reasonable  to  expect  greater  satisfaction  on  the 
part  of  the  workmen  with  their  conditions  and  better  relation- 
ship, because  of  a  closer  community  of  interests  with  employers, 
and,  in  general,  a  better  chance  for  the  workman  and  his  family. 


INFLUENCE  OF  ENGINEERING  397 

MODERN  METHODS  MAKE  A  DEMAND  FOR  ENGINEERING 
BRAINS 

It  is  natural  in  coming  to  the  University  of  Illinois  that 
I  should  want  to  address  myself  to  the  students  of  the  College 
of  Engineering,  and  to  speak  to  them  somewhat  of  the  oppor- 
tunities of  their  profession.  The  modern  facilities  for  study  — 
that  is,  the  engineering  courses  as  now  known,  whether  for 
civil,  mechanical,  mining  or  electrical  engineering,  and  the 
study  of  chemistry  to  be  employed  in  the  industrial  arts  — 
these  facilities  are  most  comprehensive  and  are  a  blessing  to 
the  youth  of  this  great  state.  It  often  occurs  to  me  to  wonder 
whether  the  young  men  really  appreciate  the  possibilities  that 
are  before  them.  It  is  not  uncommon  in  this  day,  when  big 
businesses  and  big  combinations  are  receiving  the  attention  of 
the  politician  and  statesman,  to  decry  the  possibility  of  oppor- 
tunity for  the  young  man;  but  as  a  matter  of  fact  there  never 
was  a  time  when  opportunities  were  so  great.  The  greater 
the  business  the  greater  the  demand  for  trained  men  and  the 
greater  the  reward  for  capacity,  and  for  executive  ability  and 
training  in  special  knowledge  and  ability.  When  manufactur- 
ing businesses  or  the  great  public-service  businesses  of  the 
country  were  run  on  a  small  scale  the  item  of  overhead  ex- 
pense was  one  of  the  most  serious  that  the  manager  had  to 
deal  with.  From  force  of  circumstances,  the  amount  he  could 
pay  for  trained  brains  was  relatively  small.  But  that  condi- 
tion does  not  exist  with  the  modern  methods  of  business  devel- 
opment of  large  industrial  establishments.  Development  of 
large  transportation  systems,  development  of  large  businesses 
of  every  sort,  call  for  so  much  special  knowledge  and  special 
training  that  the  young  men  of  our  engineering  colleges  have 
today  an  opportunity  that  their  predecessors  never  had. 

THE  EMPIRE  BUILDERS  OF  THE  FUTURE 

In  addition  to  one's  duty  to  one's  self  to  provide  for  the 
future,  to  take  care  of  one's  own,  the  young  man  of  the  common- 


398  ADDRESSES  OF  SAMUEL  INSULL 

wealth  owes  a  duty  to  the  state  in  which  he  lives  and  to  the 
community  in  which  he  resides.  It  is  not  necessary  for  him 
to  enter  public  life  in  order  to  perform  that  duty.  In  pri- 
vate service  he  can  get  the  personal  satisfaction  of  work  well 
done  and  of  receiving  the  remuneration  for  work  well  done. 
Furthermore,  there  are  many  problems  that  the  business  man 
and  the  engineer  will  have  to  solve  in  connection  with  the  de- 
velopment of  the  great  businesses  and  the  great  industries  of 
this  country  during  the  next  two  or  three  decades.  Many 
of  you  young  men,  I  suppose,  think  that  there  are  no  such 
opportunities  in  the  transportation  world  as  gave  the  chance 
for  a  James  J.  Hill  or  for  an  E.  H.  Harriman,  but  as  the  great 
transportation  systems  of  this  country  develop  there  will  be 
just  as  great  an  opportunity  for  the  industrial  empire-builders 
as  there  was  for  the  grand  old  empire-builder  who  has  done  so 
much  in  connection  with  the  development  of  the  Northwest, 
or  as  there  was  for  that  other  great  builder,  now  dead,  who  did 
so  much  in  connection  with  transcontinental  travel  and  the 
development  of  the  Pacific  Coast. 

I  have  about  spoken  my  allotted  time.  If  there  is  one  word 
more  that  I  may  add,  let  me  again  appeal  to  the  young  men  of 
this  institution.  There  is  no  royal  road  to  success.  Achieve- 
ment is  only  possible  by  very  hard  work.  Whether  your  career 
is  to  be  made  as  an  engineer  or  as  an  agriculturalist  or  as  a 
doctor  or  along  chemical  lines,  the  only  way  that  you  can  get 
to  the  top  is  by  the  most  strenuous  labor;  by  forgetting  the 
hours  of  the  day  and  practically  the  days  of  the  week.  Con- 
stant hard  work  has  brought  success  to  many  in  the  past,  and 
there  is  no  reason  why  the  same  task  of  constant  and  hard  work 
should  not  bring  success  to  all  you  young  men  and  women  who 
are  attending  this  university. 


POSSIBILITIES  OF  UNIFIED  ELECTRICITY 
SUPPLY  IN  THE  STATE  OF  ILLINOIS1 

NOT  SO  very  long  ago  if  one  visited  any  one  of  the 
principal  cities  of  this  country,  and  even  many  of  the 
smaller  cities  of  this  country,  he  would  find  not  one, 
but  two,  three,  sometimes  four,  companies  engaged  in  the  elec- 
tric-light-and-power  business,  competing  with  one  another, 
on  the  mistaken  theory  on  the  part  of  those  communities  that 
by  allowing  competition,  they  were  furnishing  themselves 
with  cheap  energy.  That  method  of  doing  business  has  very 
largely  disappeared.  There  is  little  or  no  competition  in  the 
large  cities  in  the  business  of  the  production  and  distribution 
of  electrical  energy. 

Competition  has  been  replaced  by  regulation.  The  com- 
munities have  gradually  learned,  in  many  cases  to  their  cost, 
that  the  paralleling  of  investments  in  the  shape  of  generating 
stations  and  distribution  systems  simply  added  to  the  cost  of 
the  product  which  the  community  desired  to  purchase,  and 
they  have  consequently  come  to  the  conclusion  that  a  regulated 
monopoly,  whether  such  monopoly  be  privately  operated  or 
publicly  operated,  is  more  in  accordance  with  scientific  methods 
than  regulation  by  competition. 

While  the  communities  in  which  we  operate  have  been 
learning  something,  we  also  have  been  learning  something. 
It  is  but  comparatively  a  few  years  ago  that  a  company,  even 
if  it  enjoyed  the  monopoly  of  business  in  the  city  in  which  it 

1.  Mr.  Insull  gave  an  illustrated  talk  in  Chicago  on  May  15,  1913,  before 
the  Commonwealth  Edison  Company  Section  of  the  National  Electric  Light 
Association.  He  repeated,  for  the  benefit  of  his  own  people,  much  of  the  ma- 
terial presented  in  the  Franklin  Institute  lecture  on  "The  Production  and  Dis- 
tribution of  Energy,"  given  in  Philadelphia  in  the  preceding  March.  Some 
new  points,  or  new  ways  of  elucidating  old  principles,  were  brought  out,  how- 
ever, and  these  are  given  in  the  present  chapter. 

399 


400  ADDRESSES  OF  SAMUEL  INSULL 

operated,  was  in  the  habit,  partly  from  lack  of  experience, 
partly  from  lack  of  apparatus,  of  establishing  a  series  of  central 
stations,  none  of  which  had  any  connection  with  any  of  the 
others.  In  fact,  I  well  remember  —  it  cannot  be  more  than 
fifteen  years  ago  —  that  one  of  the  most  distinguished  engineers 
on  the  other  side  of  the  ocean  stated  that  the  only  way  to  design 
an  economical  generating  station  and  distribution  system  was 
to  feed  an  area  having  a  radius  of  from  a  quarter  to  a  half  a 
mile. 

LEARNING  ECONOMICS  BY  EXPERIENCE 

Gradually  as  we  obtained  experience,  as  we  profited  by 
some  of  the  experiments  we  tried,  say  ten  to  fifteen  years  ago, 
we  came  to  the  conclusion  that  the  economical  way  to  produce 
and  distribute  energy  was  to  mass  its  production  at  a  given 
point,  convey  energy  by  means  of  high-tension  transmission 
lines  to  whatever  subcenters  of  distribution  we  thought  de- 
sirable, and  then  to  distribute  at  possibly  a  lower  pressure 
from  those  substations.  We  did  not  know,  at  the  time  that 
we  started  to  do  that  kind  of  thing,  much  about  diversity. 
We  had  learned  something  about  load  factors,  but  we  had 
hardly  dreamed  of  the  savings  to  be  gained  by  massing  diver- 
sified uses  or  diversified  territories,  and  we  were  practically 
stumbling  along  in  the  dark,  but  we  found  we  got  a  little 
better  results  by  the  changed  methods  that  we  were  pursuing. 

In  more  recent  years  we  have  been  inquiring  into  the 
economics  of  the  situation.  We  have  been  trying  to  discover 
the  economic  laws  governing  our  business.  We  have  been 
trying  to  solve  the  question  as  to  why  we  were  able  to  obtain 
this  or  that  result  by  pursuing  this  or  that  policy. 

Most  of  the  real  information  that  we  have  on  that  subject 
has  come  to  us  within  the  last  decade.  First  of  all,  as  I  have 
said,  we  massed  production  in  large  cities.  Later  on  we  tried 
it  in  suburban  communities.  Some  people  imagined  we  did 
this  simply  to  get  large  amounts  of  turn-over,  irrespective  of 
the  conditions  under  which  that  turn-over  was  produced. 
Others  have  imagined  that  we  have  done  it  so  as  to  be  able  to 


POSSIBILITIES  IN  ILLINOIS  401 

make  the  profits  that  follow  financial  transactions  in  the  way 
of  promotion.  But  the  fact  is  that  if  the  policies  that  have 
been  pursued  by  the  men  engaged  in  operating  this  industry, 
whether  in  the  large  cities,  in  the  smaller  places,  or  in  rural 
communities,  had  not  been  based  on  sound  economic  prin- 
ciples, they  would  have  been  bound  to  fail. 

ESTIMATED   ELECTRICAL  REQUIREMENTS  OF  THE  STATE  OF 
ILLINOIS 

It  is  estimated  that  if  everything  in  Illinois  requiring  the 
application  of  mechanical  energy  were  run  electrically,  about 
1,350,000  kilowatts  would  be  needed.  The  load  factor  would 
probably  be  about  53  per  cent.  The  kilowatt-hours  would 
amount  to  6,336,355,000.  The  total  estimated  requirement  for 
steam  railroads  is  almost  as  much  as  the  total  requirements  for 
all  other  purposes.  According  to  the  reports  of  the  State 
Railway  and  Warehouse  Commission,  the  coal  consumption 
at  the  present  time  by  the  steam  railroads  of  the  state  of  Illinois 
is  1 1 ,620,000  tons.  If  the  transportation  business  were  operated 
electrically,  assuming  the  coal  consumption  was  three  pounds 
per  kilowatt-hour,  there  would  be  a  saving  of  7,500,000  tons 
of  coal,  or  about  15  per  cent  of  the  total  coal  production  of  the 
state  of  Illinois.  I  do  not  know  of  any  greater  example  of 
possible  conservation  of  the  resources  of  this  great  state  than 
the  gradual  electrification  of  the  steam  railroads  of  the  state. 

WHAT  THE  LONDON  TIMES  SAID 

It  is  sometimes  pleasant  to  learn  what  people  say  about 
you  when  you  are,  so  to  speak,  away  from  home  and  yet  at 
home.  In  a  London  hotel  on  Wednesday  morning,  January  22, 
I  was  sitting  reading  a  copy  of  the  London  Times  containing 
an  engineering  review  for  the  year  1912,  when  I  came  across 
this  paragraph  in  reference  to  electrical  development:  "There 
was  a  pleasing  note  of  optimism  in  the  news  that  the  Common- 
wealth Edison  Company,  of  Chicago,  which  is  probably  the 


402  ADDRESSES  OF  SAMUEL  INSULL 

most  important  electric-supply  authority  in  the  world,  had 
placed  an  order  with  an  English  firm  for  a  25,000-kilowatt 
turbine-generator  —  the  greatest  power  ever  contemplated  for 
a  single  shaft  for  any  turbine  or  engine  on  shore  or  afloat."  I 
took  that  as  a  great  compliment  for  us  all. 

SOCIOLOGICAL  ASPECTS  OF  CENTRALIZED  ENERGY 

It  is  probably  not  too  bold  a  prediction  to  say  that,  within 
a  relatively  few  years,  the  entire  eastern  part  of  the  United 
States  will  be  covered  by  a  network  of  electrical  transmission 
and  distribution  lines.  Situated  in  that  area  at  points  where 
the  greatest  economy  of  production  can  be  achieved  will  be 
large  generating  stations.  The  extent  of  territory  that  they 
serve  will  depend  naturally  upon  the  density  of  population  of 
the  immediate  surrounding  territory  and  the  relation  of  cost 
of  energy  to  interest  charges  on  transmission  lines,  governed 
largely  by  the  distance  from  the  source  of  fuel,  namely,  coal, 
or  the  distance  from  hydro-electric  plants,  of  which  large 
numbers  will  undoubtedly  be  erected  and  prove  economical 
when  operated  in  connection  with  large  distribution  systems, 
with  steam  plants  as  reserves. 

I  myself  am  inclined  to  think,  and  I  said  this  the  last  time 
I  was  addressing  myself  to  this  subject,  that  a  great  many  of 
the  problems  of  living,  of  labor,  the  bringing  up  of  children 
under  conditions  where  they  can  get  the  greatest  chance  to 
live  and  be  educated  and  be  surrounded  with  the  proper  en- 
vironment —  I  think  that  those  problems  can  be  very  largely 
solved  by  a  wise  system  of  production  and  distribution  of  energy 
extending  over  the  rural  communities  in  which  we  live,  or  rather 
which  surround  us. 

BEARING  ON  THE  ELECTRIFICATION  OF  RAILROADS 

I  believe  that  the  problem  of  the  electrification  of  our  steam 
railroads  is  going  to  find  its  solution  when  the  density  of  travel 
is  great  enough  to  justify  it  in  connection  with  this  same  mass- 


POSSIBILITIES  IN  ILLINOIS  403 

ing  of  production.  If  at  the  same  time  energy  is  produced  for 
the  use  of  the  small  manufacturer,  for  the  use  of  the  mine  owner, 
for  the  use  of  the  rural  community,  for  the  use  of  the  farmer; 
if  at  the  same  time  energy  is  produced  not  only  for  the  use  of  the 
interurban  railroad  but  for  the  use  of  the  great  trunk-line  sys- 
tems of  the  country,  the  combined  result  will  be  such  a  low 
cost  of  production  of  energy  as  to  make  it  desirable  for  a 
manufacturer  to  settle  in  any  rural  community  where  the 
quantity  of  labor  justifies  his  building  his  factory. 

I  believe  that  at  the  same  time  many  of  the  problems  in 
connection  with  the  enormous  increase  in  expenses  in  the  op- 
eration of  our  great  systems  of  transportation  will  disappear. 
One  of  the  most  expensive  things  today  in  connection  with 
operating  a  great  railroad  is  the  cost  of  handling  freight  at 
terminals  where  land  is  worth  $40  a  square  foot.  The  cost  of 
transporting  freight  through  cities  like  Chicago,  Cincinnati, 
St.  Louis  and  the  other  important  cities  of  the  Central  West 
is  very  high.  One  of  the  principal  steam-railroad  men  in  this 
community  told  me  not  later  than  this  afternoon  that  it  is  a 
very  common  thing  for  a  steam  railroad  to  haul  freight  500 
miles  for  nothing,  because  all  the  money  that  the  company 
received  for  hauling  it  was  consumed  in  handling  the  freight  and 
carrying  it  out  of  the  city  of  Chicago. 

WHAT  CHEAP  ENERGY  MEANS 

If  anywhere  along  the  lines  of  steam  railroads  the  man- 
ufacturer can  establish  his  factory,  what  better  solution  can 
you  find  for  the  handling  of  the  freight  problem?  I  have  only 
to  draw  the  attention  of  those  who  have  traveled  much  on  the 
Lake  Shore  Railroad  to  the  enormous  change  in  conditions 
that  has  occurred  between  South  Bend  and  Elkhart,  in  In- 
diana, since  the  development  of  the  water-powers  on  the  St. 
Joseph  River.  It  is  a  continuous  city,  almost,  from  South 
Bend  along  the  railroad  to  Elkhart,  whereas  a  few  years  ago 
it  was  nothing  but  farms.  That  is  the  result  of  cheap  power. 

Those  of  you  who  are  familiar  with  the  busy  centers  of 


404  ADDRESSES  OF  SAMUEL  INSULL 

manufacturing  in  Connecticut,  Rhode  Island  and  Massachusetts 
realize  the  fact  that  it  is  cheap  power  that  originally  produced 
the  concentration  of  manufacturing  in  that  territory  and  that 
built  up  those  great  eastern  enterprises. 

If  you  go  farther  northwest  and  take  the  great  flour-milling 
business  established  on  the  Mississippi  River  at  St.  Paul  and 
Minneapolis,  what  do  you  find  was  the  cause  of  the  original 
establishment  there  of  the  mills?  First,  the  material,  the 
wheat  of  the  Northwest,  was  close  at  hand,  and,  second,  the 
cheap  power  of  the  waterfalls. 

I  think  I  am  justified  in  saying  that  if  you  will  allow  the 
cost  of  distribution  —  I  speak  not  only  of  the  operating  cost, 
but  of  the  investment  cost  of  distribution  —  the  difference  of 
cost  of  energy  between  that  from  a  steam  station  and  that  from 
a  hydro-electric  station  is  of  little  or  no  consequence  as  long  as 
we  can  get  coal  as  cheap  as  we  can  get  it  here  in  this  state  of 
Illinois.  I  see  no  reason  whatever,  if  the  figures  that  I  have 
presented  to  you  tonight  are  correct  (and  my  experience  of 
the  last  ten  years  gives  me  absolute  confidence  in  those  figures 
as  the  basis  for  the  financial  operations  that  I  have  made  in 
the  last  few  years),  why  we  should  not  carry  cheap  energy  to 
the  door  of  every  home  in  this  state  of  Illinois. 


BROAD  QUESTIONS  OF  PUBLIC  POLICY1 

THIS  report  is  signed  by  Messrs.  N.  F.  Brady,  president 
of  the  New  York  Edison  Company;  Everett  W.  Burdett, 
general  counsel  of  the  Edison  Electric  Illuminating 
Company  of  Boston;  H.  M.  Byllesby,  head  of  the  firm  of 
H.  M.  Byllesby  &  Co.;  Henry  L.  Doherty,  head  of  the  firm  of 
Henry  L.  Doherty  &  Co.;  Charles  L.  Edgar,  president  of  the 
Edison  Electric  Illuminating  Company  of  Boston;  W.  W. 
Freeman,  ex-vice-president  of  the  Edison  Electric  Illuminating 
Company  of  Brooklyn  and  at  the  present  time  connected  with 
the  Alabama  Power  Company;  George  H.  Harries,  president  of 
the  Louisville  Gas  and  Electric  Company;  Joseph  B.  McCall, 
president  of  the  Philadelphia  Electric  Company;  Thomas  E. 
Murray,  vice-president  of  the  New  York  Edison  Company; 
Samuel  Scovil,  vice-president  of  the  Cleveland  Electric  Il- 
luminating Company;  Charles  A.  Stone,  head  of  the  firm  of 
Stone  &  Webster;  Frank  M.  Tait,  of  the  Dayton  (Ohio)  Power 
&  Light  Company;  Arthur  Williams,  of  the  New  York  Edison 
Company,  and  myself.2 

One  of  the  reasons  for  making  a  practice  of  reading  the  re- 
port of  our  public  policy  committee  at  an  open  session  during 
the  time  of  the  annual  convention  of  the  association  is  to 
acquaint  our  friends  not  directly  connected  with  the  great 

1.  As  stated  in  the  text,  Mr.  Insull  has,  for  a  number  of  years,  presented 
the  report  of  the  public  policy  committee  at  the  annual  conventions  of  the 
National  Electric  Light  Association.     Usually  the  report  is  read  at  an  evening 
session  that  is  perhaps  the  culmination  of  the  convention  for  dignity  and 
impressiveness.     Two  of  Mr.  Insull's  speeches  on  these  occasions  are  given 
in  this  collection.     The  one  herewith  was  delivered  on  June  4,  1913,  at  the 
Chicago  convention.     The  other  ("The  Final  Test  of  Welfare  Work,"  page 
193)  was  delivered  at  the  New  York  convention  of  1911. 

2.  A  few  of  the  gentlemen  named  occupy  different  positions  now  (1915) 
than  at  the  date  of  this  report. 

405 


406  ADDRESSES  OF  SAMUEL  INSULL 

industry  with  which  most  of  you  in  this  room  are  associated 
with  the  general  trend  of  our  policy  on  all  public  matters.  It 
has  been  my  privilege  for  a  number  of  years  to  present  this 
report,  and  to  make  some  comments  on  it  and  to  refer  to  some 
of  the  problems  connected  with  our  industry.  The  last  occa- 
sion was  a  year  ago,  on  the  Pacific  Slope,  at  the  Seattle  conven- 
tion; and  I  then  drew  attention  to  the  fact  that  the  public 
policy  committee  of  the  association  is  composed  of  men  who 
represent  the  larger  financial  interests  connected  with  the 
electric-light-and-power  industry. 

RESPONSIBILITIES  OF  MANAGERS  OF  UTILITY  PROPERTIES 

Our  president,1  in  his  opening  speech,  stated  that  the 
probable  cash  investment  in  our  business  in  this  country 
amounts  to  about  $2,500,000,000,  and  I  presume  that  it  is  still 
fair  to  repeat  the  statement  made  by  me  at  the  Seattle  conven- 
tion of  1912  that  the  gentlemen  who  signed  the  report  which  I 
have  just  read  to  you  represent  and  carry  on  their  shoulders 
the  responsibility  that  goes  with  upwards  of  one-half  of  that 
investment.  So  it  is  right  to  assume  that  men  in  that  position, 
men  who  are  responsible  for  from  $1,000,000,000  to  $1,250,- 
000,000  of  invested  capital  must  feel  the  serious  responsibilities 
that  devolve  upon  them  when  they  are  considering  the  character 
of  the  report  they  shall  put  out,  which,  as  I  have  stated,  is 
practically  the  declaration  of  the  association  as  to  its  policy 
on  public  affairs.  I  would  especially  draw  your  attention  to  the 
fact  that  the  greater  part  of  their  report  deals  with  such  ques- 
tions as  employees'  welfare,  the  minimum  wage,  safety  and 
sanitation,  and  accident  compensation. 

In  these  latter  days  corporation  managers,  men  who  are 
responsible  for  hundreds  of  millions  of  dollars,  are  seldom  given 
credit  by  the  statesmen  and  politicians  discussing  corporate 
matters  for  taking  any  interest  in  the  welfare  of  their  employees, 
in  the  question  as  to  whether  these  employees  should  receive 

1.  The  president  of  the  National  Electric  Light  Association  at  that  time 
was  Mr.  Frank  M.  Tail,  of  Dayton,  Ohio. 


PUBLIC  POLICY  407 

a  living  wage,  or  in  questions  connected  with  the  safety  and 
sanitation  of  their  establishments.  And  yet  there  is  an  enor- 
mous expenditure  along  these  same  lines  going  on  from  year  to 
year,  not  only  in  the  industry  with  which  we  are  connected, 
but  in  other  manufacturing  industries.  Take,  for  instance, 
the  steel  industry.  In  the  year  1911  the  United  States  Steel 
Corporation  spent  upwards  of  $2,000,000  in  safety  work  and 
sanitation.  It  has  about  200,000  employees,  and  therefore 
during  the  year  it  spent  about  $10  for  each  employee  in  looking 
after  the  health  and  general  welfare  of  the  men.  The  stock- 
holders of  the  company  got  no  dividends  from  these  expen- 
ditures any  more  than  our  stockholders  get  dividends  from  such 
expenditures.  The  only  dividends  are  physical,  mental  and 
moral  health  —  very  valuable  assets  in  any  community  and  in 
any  country. 

This  great  industry  of  ours,  producing  electrical  energy, 
probably  employs  upwards  of  200,000  men  in  the  United 
States;  and  I  do  not  think  that  an  estimate  of  $2,000,000  a 
year  spent  on  a  similar  class  of  work  by  ourselves  at  all  over- 
shoots the  mark. 

GOVERNMENT  OWNERSHIP  AND  CONSERVATION  OF  RESOURCES 

Some  reference  was  made  in  the  report  to  the  question  of 
municipal  ownership.  Most  of  you  in  this  room  have  heard 
that  subject  discussed  pro  and  con,  again  and  again.  The 
result  of  municipal  ownership  is  usually,  I  would  say  almost 
universally,  a  waste  of  the  taxpayers'  money;  so  that  apart 
from  the  interest  we  have  in  the  subject,  being  engaged  in  a 
business  subject  to  regulation  and  therefore  subject  to  protec- 
tion, we  are  all  of  us  very  largely  interested  in  it  from  the 
point  of  view  of  the  taxpayer.  The  public-service  companies 
of  almost  every  community  have  paid  their  fair  share  of  the 
taxes.  I  am  glad  to  say  that  there  are  very  few  of  them  who  do 
not  pay  their  fair  share  of  the  taxes;  hence  the  public-service 
companies  are  very  vitally  interested  in  this  question  as  tax- 
payers. 

Fortunately,  the  wave  that  went  over  the  country  some 


408  ADDRESSES  OF  SAMUEL  INSULL 

twenty  years  ago  in  connection  with  municipal  ownership  has 
spent  itself;  and  if  we  will  simply  take  the  experience  obtained 
during  this  interval  in  the  operation  of  utilities  of  the  character 
that  we  represent;  if  we  simply  take  the  experience  of  the  vari- 
ous communities,  the  various  municipal  corporations,  that  have 
undertaken  to  operate  these  utilities,  we  can  supply  ourselves 
with  all  the  figures  and  arguments  necessary  to  demonstrate 
that  the  operation  by  a  municipality  of  a  public  utility  is  not  a 
necessary  function  of  government,  nor  a  part  of  the  function  of 
government. 

When  we  met  a  year  ago  at  Seattle,  we  heard  a  great  deal 
about  the  subject  of  hydro-electric  development  on  the  Pacific 
Coast  and  on  both  sides  of  the  Rocky  Mountains,  and  we  were 
given  the  point  of  view  of  our  friends  in  the  Pacific  States  as  to 
the  course  now  pursued  by  the  Federal  government  with  relation 
to  the  water-powers  in  the  Forest  Reserves.  I  think  it  was 
illuminating,  the  point  of  view  that  we  reached  there.  We 
learned  that  there  are  large  tracts  in  some  of  the  great  states 
bordering  on  the  Pacific  the  development  of  which  is  absolutely 
stopped  owing  to  the  policy,  or  rather  lack  of  business  policy, 
on  the  part  of  the  Federal  government.  Little  or  nothing  has 
been  done  in  the  last  year.  Practically  no  advance  has  been 
made  in  the  direction  of  getting  a  statement  of  policy  from  the 
Federal  government  —  something  that  would  initiate  the  de- 
velopment of  the  vast  water-powers  under  government  control 
on  a  basis  that  would  give  a  fair  return  to  capital  invested. 
This  subject,  while  not  of  very  material  consequence  to  those 
of  us  who  live  in  the  Mississippi  Valley  or  in  the  states  border- 
ing on  the  Atlantic  seaboard,  is  of  vast  consequence  to  those  of 
our  number  who  come  from  the  two  sides  of  the  Rocky  Moun- 
tains, and  is  one  to  which  the  public  policy  committee  and  the 
hydro-electric  committee  of  the  association  should  give  most 
vigorous  and  close  attention  in  the  near  future. 

THE  POLICY  OF  REGULATION 

One  of  what  may  be  called  the  trends  of  the  times  is  in  the 
direction  of  a  closer  regulation  of  our  business  by  state  com- 


PUBLIC  POLICY  409 

missions.  Our  business  has  always  been  regulated,  either 
locally  or  else  by  the  state,  unless  the  state  or  municipality 
has  chosen  to  neglect  this  power.  There  is  one  great  advantage 
that  must  necessarily  follow  regulation,  and  that  advantage  is 
protection.  Some  of  us  are  regulated  by  municipal  authority, 
by  boards  of  aldermen;  and  the  only  direction  their  regulation 
takes  is  regulation  downward  in  price.  Others  work  under 
state  commissions  that  have  given,  some  of  them  very  satis- 
factory, others  very  unsatisfactory  decisions;  but  take  it  al- 
together, by  and  large,  the  general  tendency  of  state  commis- 
sions has  been  satisfactory.  As  they  have  grown  familiar  with 
our  business  and  have  become  educated  in  its  requirements, 
their  treatment  of  us  has  become  more  liberal.  Speaking 
both  personally  and  I  think  on  behalf  of  practically  all  the 
members  of  the  public  policy  committee,  I  would  urge  upon  the 
members  of  this  association  to  do  whatever  they  can  to  bring 
about  fair  commission  laws  in  the  states  in  which  they  operate. 
I  first  began  to  address  myself  to  this  subject  when  I  was 
president  of  the  association,  now  some  fifteen  years  ago.  At 
that  time1  I  asserted  that  regulation  must  be  followed  by  pro- 
tection, and  that  regulation  and  protection  naturally  lead  to 
monopoly.  Ours  is  a  business,  as  I  will  point  out  to  you  later, 
which  can  be  run  successfully  only  as  a  monopoly  —  successful, 
I  mean,  alike  to  the  security  holders  and  to  the  public.  If  we 
are  to  run  our  business  permanently  as  a  monopoly,  the  truly 
economic  condition  under  which  we  should  operate,  we  must 
be  willing  to  have  imposed  upon  us  a  fair  amount  of  regulation, 
and  that  fair  amount  of  regulation  must  necessarily  be  fol- 
lowed by  a  fair  amount  of  protection.  If  we  get  the  protection 
to  which  we  are  entitled,  and  which  we  must  finally  get  as 
these  commissions  become  educated  in  the  intricacies  of  our 
business,  the  value  of  our  securities  will  be  greatly  enhanced, 
the  price  that  we  must  pay  for  money,  which,  after  all,  is  the 
greatest  item  of  expense  with  us,  will  be  materially  lowered; 

1.  Mr.  Insult's  presidential  address  to  the  National  Electric  Light  Asso- 
ciation in  1898  is  printed  in  the  present  collection  under  the  title  "Standardi- 
zation, Cost  System  of  Rates,  and  Public  Control,"  page  34  et  seq. 


410  ADDRESSES  OF  SAMUEL  INSULL 

and  we  shall  be  able,  on  account  of  an  absence  of  raiding,  on 
account  of  cheaper  money,  to  make  a  fair  return  to  our  investors 
and  at  the  same  time  give  fair  and  reasonably  low  rates  to  our 
customers. 

THE  DEVELOPMENT  OF  ELECTRIC  SERVICE  IN  AND 
NEAR  CHICAGO 

Some  of  my  friends  have  thought  it  might  interest  you  if 
I  refer  somewhat  to  our  business  as  we  conduct  it  in  this  neigh- 
borhood. It  is  a  very  great  pleasure  to  me  to  receive  the  mem- 
bers of  this  association  in  my  home  town.  You  will  pardon 
the  egotism  if  I  say  that  I  know  there  is  a  great  deal  to  be 
seen  here,  in  connection  with  the  business  of  producing  and 
distributing  electrical  energy,  that  should  interest  you,  and 
from  which  most  of  you  can  draw  profitable  lessons.  I  do  not 
mean  to  say  that  I  can  not  get  equally  profitable  lessons  by 
visiting  the  communities  in  which  you  all  operate;  but  here, 
in  the  city  of  Chicago,  we  have  had  the  opportunity,  partly 
from  peculiar  local  conditions,  partly  from  the  characteristics 
of  our  people,  but  mainly  from  the  courage  of  my  financial 
associates,  who  have  treated  me  so  kindly  over  a  period  of 
twenty  years  —  we  have  had  the  opportunity  of  solving,  to  a 
large  extent,  the  question  of  the  economical  production  and 
distribution  of  energy. 

When  I  came  to  Chicago  in  1892  the  average  size  of  our  units 
of  production  was  about  200  horse-power.  At  the  present  time 
the  average  size  is  nearer  20,000  horse-power,  and  within  the 
next  two  years  this  size  will  be  increased,  so  that  our  largest 
units  will  be  45,000  horse-power.  We  have  been  able  to 
produce  the  conditions  that  justify  the  use  of  such  large  units 
of  energy  by  a  system  of  selling  our  product  at  the  lowest 
possible  price  to  the  customer  who  uses  it  the  greatest  number  of 
hours  in  the  year.  It  is  purely  a  question  of  averaging  the  in- 
terest account  over  the  greatest  number  of  hours,  and  con- 
sequently making  interest  charges  the  lowest  possible  sum  per 
hour.  That  is  all  that  is  involved  in  the  economical  production 
and  distribution  of  energy. 


PUBLIC  POLICY  411 

At  the  present  time  we  have  a  rating  of  425,000  horse- 
power. Last  winter  we  had  a  load  of  350,000  horse-power. 
We  have  machinery  on  order  of  112,500  horse-power,  so  that 
by  the  time  that  machinery  is  installed  our  plant  rating  will 
be  637,500  horse-power.  We  are  actually,  at  the  present  time, 
putting  up,  or  else  just  getting  ready  to  let  contracts  for, 
buildings  that  will  house  an  additional  rating  of  285,000 
horse-power,  so  that  our  present  engineering  scheme  for  the 
use  of  energy  in  a  community  of  only  about  2,500,000  people 
contemplates  somewhere  about  850,000  horse-power. 

I  think  if  your  convention  stays  away  from  Chicago  as  long 
as  it  did  this  last  time,  that  the  chances  are  when  you  return  we 
shall  be  up  toward  a  million  horse-power,  or  possibly  started  on 
the  second  million.  We  put  out  800,000,000  kilowatt-hours  in 
the  year  1912.  That  is  an  amount  of  energy  equal  to  the 
central-station  production  of  any  four  cities  of  the  United 
States  outside  of  Chicago.  I  will  not  name  any  other  cities; 
I  would  not  want  to  embarrass  my  friends  or  embarrass  myself 
in  mentioning  them.  We  burned  1,103,230  tons  of  coal  last 
year.  If  the  efficiency  of  our  apparatus  had  been  on  the  basis 
of  the  year  1902,  just  ten  years  previous,  our  coal  consumption 
would  have  been  2,650,000  tons;  so  that  I  think  we  are  prob- 
ably among  the  biggest  factors  in  the  state  of  Illinois  in  con- 
nection with  the  conservation  of  the  natural  resources  of  the 
state.  We  sell  our  energy  at  an  average  price  of  a  little  over 
two  cents  a  kilowatt-hour,  and  we  produce  it  at  an  average 
price  of  a  little  over  a  cent,  not  figuring  interest  and  deprecia- 
tion. 

THE  MASSING  OF  PRODUCTION 

These  figures  are  mentioned  with  no  idea  of  suggesting  that 
all  of  our  members  can  accomplish  the  same  thing.  All  have 
not  the  same  conditions.  Vested  interests  have  grown  up, 
dealing  with  the  production  of  energy  in  various  communities, 
which  it  is  difficult  to  dislodge.  They  are  all  of  them  in  the 
larger  cities  doing  a  business  so  great  that  they  do  not  need  the 
encouragement  that  would  come  from  knowing  what  we  have 


412  ADDRESSES  OF  SAMUEL  INSULL 

accomplished.  I  mention  these  figures  for  the  advantage  of 
our  members  who  come  from  the  smaller  communities  through- 
out the  country.  I  refer  especially  to  the  communities  in  the 
more  thickly  settled  portions  of  the  country;  to  any  portion  of 
the  United  States  between  the  center  of  the  Mississippi  Valley 
and  the  Atlantic  seaboard,  or  to  that  portion  of  the  Pacific 
Coast  which  is  most  densely  populated  and  where  the  pur- 
chasing powers  of  the  people  is  great  because  of  the  marvelous 
productiveness  of  their  soil.  I  mention  these  figures  for  their 
encouragement.  Relatively,  they  can  attain  the  same  results 
that  we  have  done. 

It  is  not  necessary  —  it  is  an  economic  blunder  —  to  have 
a  generating  station  in  every  small  community,  irrespective  of 
what  other  small  communities  are  adjacent  to  it.  The  presi- 
dent of  this  association  referred  in  his  opening  address  to  the 
tendency  to  change  of  ownership  among  the  electric-light-and- 
power  properties  of  the  country,  especially  those  in  the  smaller 
communities.  Where  that  change  of  ownership,  or  the  massing 
of  ownership,  has  taken  place  among  isolated  properties, 
there  is  little  advantage  to  be  gained,  except  from  centralized 
financing;  but  where  that  massing  of  energy  takes  place  in  a 
number  of  communities  more  or  less  close  to  one  another,  so 
that  they  can  be  joined  up  by  a  system  of  high-tension  distribu- 
tion, those  combinations  are  following  true  economic  laws,  and 
if  properly  financed  are  bound  to  succeed.  I  know  of  no  better 
way  to  fight  municipal  ownership  or  municipal  operation  in  the 
small  communities  of  the  Central  West  than  by  adopting  a 
system  of  centralization  of  production  and  distribution.  It 
means  low  cost  of  the  energy  at  the  prime  source  of  supply. 
It  means  the  economical  distribution  of  that  energy  over  the 
territory  served.  It  opens  up  possibilities  of  expansion  in 
business  to  such  an  extent  that  if  I  gave  expression  to  my  real 
views  on  the  subject  I  would  be  looked  upon  as  a  dreamer. 

I  often  wish  that  I  could  see  fifty  years  ahead,  and  be  able 
to  realize  and  enjoy  the  situation  that  will  develop  in  connection 
with  the  great  industry  with  which  most  of  us  are  concerned. 
I  should  expect  to  see  a  vast  distribution  system  stretching  from 


PUBLIC  POLICY  413 

one  end  of  the  country  to  the  other,  wherever  density  of  popu- 
lation justified  it;  to  see  electrical  energy  used  for  all  classes  of 
power,  where  power  was  required  at  all.  By  that  time  power 
will  certainly  be  produced  from  a  common  source.  There  will 
be  the  closest  co-operation  between  the  man  who  produces  his 
power  from  steam  and  the  man  who  produces  his  power  direct 
from  water,  a  co-operation  that  will  lead  to  a  cost  of  energy  so 
low  as  to  place  it  within  the  reach  of  all,  and  make  it  possible 
to  develop  at  almost  any  place  almost  any  class  of  industry 
wherever  transportation  is  provided  and  it  is  possible  to  get  the 
operatives  necessary  for  the  manufacture. 


PRESENT  AND  FUTURE  DISTRIBUTION  OF 
ELECTRICAL  ENERGY1 

IT  IS  a  very  great  pleasure  to  me  to  be  present  at  a  meeting 
of  this  character,  in  this  location,  arranged  mainly  by  the 
people  interested  in  the  incandescent-lamp  business.  Unless 
my  friend  Mr.  E.  W.  Rice  antedates  me  in  the  lamp  business, 
I  think  I  am  the  oldest  lamp  manufacturer  in  point  of  years  on 
this  island  today.  I  think  the  first  manufacturing  cost  sheet 
that  I  ever  got  out  on  the  cost  of  lamps  was  for  the  month  of 
March,  1881,  thirty-two  years  ago.  The  cost  of  the  lamps  the 
first  month,  as  I  remember  it,  was  about  $1.50  to  $1.75  apiece, 
and  we  were  selling  them  for  35  cents  apiece.  It  was  not  a  very 
good  commercial  proposition  at  that  time. 

If  my  memory  serves  me  rightly  —  if  Mr.  Morrison  had 
been  here  he  would  have  been  able  to  assure  me  of  the  fact  —  I 
think  that  the  first  specimen  of  electrical  transmission  that  I 
ever  saw  was  the  transmission  line  running  from  the  old  machine 
shop  at  Menlo  Park,  N.  J.,  upon  the  hill,  to  a  point  about  half 
a  mile  (maybe  not  as  much  as  that,  probably  a  quarter  of  a 
mile)  east  of  the  present  Menlo  Park  station  on  the  Pennsyl- 
vania Railroad.  The  building  where  the  motor  was  installed 
was  burned  down  some  years  ago.  It  housed  the  first  commer- 
cial incandescent-lamp  factory  in  this  or  any  other  country. 
I  am  inclined  to  think  that  a  portion  of  the  operations  were 
effected  by  the  utilization  of  a  bipolar  motor  constructed  on 
the  lines  of  the  old  Edison  design  of  bipolar  dynamos,  neces- 

1.  An  address  delivered  on  September  4,  1913,  during  the  "Co-operation 
Conference"  on  Association  Island  (in  Lake  Ontario),  N.  Y.  This  island 
takes  its  name  from,  and  is  the  summer  rendezvous  of,  the  National  Electric 
Lamp  Association.  A  number  of  electrical  and  business  men  of  prominence 
were  invited  to  attend  the  "Co-operation  Conference"  to  discuss  effective 
co-operation  not  only  between  the  various  branches  of  the  electrical  industry, 
but  between  producer  and  consumer  as  well. 

414 


DISTRIBUTION  OF  ENERGY  415 

sarily  a  direct-current  machine  at  that  time,  the  source  of 
power  being,  as  I  have  stated,  in  the  machine  shop  on  the  hill. 
That  is  my  impression;  I  know  the  motor  ran  there,  and  I 
know  that  a  very  few  years  ago  that  same  motor  was  in  use 
at  the  Harrison  (N.  J.)  factory  of  the  General  Electric 
Company. 

ELECTRIC  LIGHTING  TO  BECOME  AS  A  BY-PRODUCT  OF  THE 
ELECTRIC-SERVICE  BUSINESS 

I  have  been  asked  to  speak  to  you  on  the  question  of  the 
transmission  of  energy,  which  is  an  important  subject,  not 
alone  to  us  but  to  everybody  else  in  this  great  country.  It 
is  a  serious  question  whether  the  economical  production  and 
transmission  of  energy  is  not  a  more  important  matter  than 
the  economical  administration  of  the  transportation  systems 
of  the  country.  If  you  will  go  back  but  relatively  a  few  years 
and  seek  for  the  foundation  of  a  number  of  the  great  manufac- 
turing industries  that  are  situated  to  the  southward  and  to  the 
eastward  of  us,  you  will  find  that  long  before  there  was  any  great 
unified  system  of  transportation  existing  in  this  country  the 
manufacturing  interests  represented  today  by  enormous  estab- 
lishments were  at  that  time  situated  very  largely  where  they  are 
today.  Of  necessity  they  were  much  smaller.  They  were 
usually  situated  on  some  New  England  stream  where  power 
could  be  developed  cheaply.  You  see  the  remnants  of  those 
small  water-powers  even  to  this  day.  Some  that  have  been 
abandoned  by  the  manufacturers  have  been  taken  up  in  this 
generation  by  manufacturers  of  a  different  class  of  product, 
kilowatt-hours,  and  as  you  go  along  the  marvelous  roads  of 
Vermont  and  New  Hampshire  and  view  the  scenery  in  what 
may  well  be  called  the  playground  of  America,  you  will  often 
come  across  a  small  water-wheel  with  a  single  generator  at- 
tached. If  you  will  follow  the  leads  running  off  from  that 
machine  you  will  find  lines  extending  in  every  direction.  Prob- 
ably that  water-power  is  the  source  of  energy  for  ten,  fifteen, 
twenty  or  thirty  miles  of  transmission  lines. 


416  ADDRESSES  OF  SAMUEL  INSULL 

The  business  of  the  production  of  electrical  energy  started 
from  the  other  end,  not  from  a  cheap  source  of  power,  but  really 
from  a  very  expensive  source  of  power.  Some  thirty  years  ago 
the  illustrious  inventor  whose  name  should  be  on  every  incan- 
descent lamp  produced  in  the  world,  simply  in  honor  of  the 
man  who  is  entitled  to  the  credit  of  founding  the  great  industry 
with  which  we  are  connected  (I  refer  to  Mr.  Edison)  installed 
the  first  generating  station  and  distribution  system  in  the 
lower  part  of  New  York  city.  At  that  time  the  business  of 
producing  and  distributing  electrical  energy  was  mainly  for 
the  purpose  of  producing  light  through  the  use  of  the  incandes- 
cent lamp.  The  business  of  supply  energy  for  motors  was,  so 
to  speak,  a  by-product,  just  as  much  a  by-product  of  the  elec- 
tric-lighting business  of  that  day  as  coke  and  tar  and  ammonia 
are  by-products  of  the  gas  business  today.  Notwithstanding 
the  fact  that  the  incandescent-lamp  business  has  grown  so  that 
100,000,000  lamps  are  consumed  in  this  country  in  a  year,  the 
electric-lighting  end  of  our  business  is  destined  to  become, 
very  largely,  a  by-product.  That  side  of  our  business  thirty, 
twenty,  even  ten,  years  ago  was  our  main  stand-by;  it  was  the 
portion  of  our  business  from  which  we  got  the  necessary  income 
in  order  to  pay  a  return  to  those  investing  their  capital  in  our 
business.  Although  of  such  great  importance  as  late  as  ten 
years  ago,  today,  in  looking  to  the  future,  I  think  that  it  is 
perfectly  safe  to  say  that  the  lighting  end  of  the  business  will 
be  the  by-product  side  of  the  business,  and  I  think  the  main 
income  for  a  return  on  our  investment  will  come  from  the  power 
business. 


INEVITABLE  THAT  ALL  ENERGY  REQUIREMENTS  OF  A  GIVEN 
AREA  SHOULD  BE  SUPPLIED  BY  ONE  ORGANIZATION 

A  few  figures  will  show  you  what  I  have  in  mind.  At  the 
present  time,  in  any  real  large  central-station  system  where 
the  entire  energy  requirements  of  the  community  outside  of  the 
isolated  plants  are  supplied  from  one  source  —  and  that  is  the 
only  economic  way  of  supplying  energy,  as  I  shall  endeavor  to 


DISTRIBUTION  OF  ENERGY  417 

show  later  on  —  the  amount  of  energy  used  for  incandescent 
lighting,  as  far  as  we  are  able  to  check  it,  is  not  more  than  27 
per  cent  of  the  total  requirements  under  the  best  conditions. 
This  figure  may  become  45  per  cent  of  the  total  under  con- 
ditions not  so  good. 

The  money  figures  are  somewhat  different.  It  is  very 
difficult  to  get  down  to  exact  figures  on  the  lighting  side  of  the 
business,  for  the  reason  that  many  motor  devices  and  miscel- 
laneous appliances  are  on  our  lighting  circuits,  and  the  energy 
used  by  those  devices  is  metered  as  electric  lighting.  There- 
fore, when  the  consumers'  bills  are  rendered,  they  are  rendered 
as  lighting  bills.  But  take  the  principal  property  that  I  my- 
self have  charge  of  —  the  Commonwealth  Edison  Company 
of  Chicago  —  its  income  from  lighting  today,  although  it  has 
more  customers  than  any  central-station  company  in  the  world,1 
is  only  47  per  cent  of  its  total  revenue.  Its  output  for  lighting 
is  25  per  cent  of  its  total  output. 

You  will  understand,  therefore,  why  I  take  the  position 
that  our  business  is  decidedly  a  power  business  rather  than  a 
lighting  business,  and  that  our  function  is  to  produce  the  energy 
that  is  required  in  a  given  territory,  whether  that  energy  is 
used  for  purposes  of  lighting,  for  purposes  of  stationary  power, 
for  industrial  purposes,  or  for  purposes  of  transportation.  Just 
as  inevitably  as  the  sun  rises  and  sets,  so,  to  my  mind,  it  is 
inevitable  that  eventually  the  production  of  energy  for  any 
given  community  or  any  given  territory,  whichever  may  be 
found  to  be  the  economic  basis  to  operate  on  —  the  control  of 
that  production  and  the  control  of  the  distribution  must  be 
in  the  hands  of  one  organization.  If  it  cannot  be  done  any 
other  way  —  if  that  result  cannot  be  obtained  through  the 
medium  of  private  capital  — I  feel  so  strongly  as  to  what 
must  finally  take  place,  that  in  my  judgment  it  will  become 
a  public  function.  It  rests  largely  with  the  people  in  this 
room  as  to  whether  it  shall  be  done  by  private  capital  in 
this  country,  or  whether  it  shall  be  done  as  a  governmental 
operation. 

1.  See  note  to  next  chapter,  "Electrical  Securities,"  on  page  437. 


418  ADDRESSES  OF  SAMUEL  INSULL 

Low  LOAD  FACTOR  MAKES  LIGHTING  BUSINESS  ALONE 
UNDESIRABLE 

If  I  were  addressing  an  audience  of  laymen,  I  would  prob- 
ably trace  the  various  conditions  that  had  led  up  to  this  situa- 
tion; but  most  of  you  people  in  this  room  are  closely  identified 
with  one  side  or  the  other  of  the  electric-light-and-power  in- 
dustry, either  the  manufacturing  side  of  the  business  or  the 
operating  side;  and  if  you  will  think  but  for  a  moment,  you 
must  agree  with  me  that  the  development  of  the  apparatus 
of  largely  the  last  ten  years  has  led  up  to  the  situation  such  as 
I  have  described  to  you.  It  is  the  development  of  the  rotary 
converter  —  its  perfection  as  a  piece  of  apparatus  —  and  the 
development  of  the  turbo-generator  —  those  two  things  above 
everything  else.  To  these  might  be  added  the  improvements 
in  construction  and  efficiency  of  static  transformers.  These 
three  elements  have  led  to  the  building  of  very  large  generating 
stations  and  the  development  of  great  distribution  systems  to 
carry  away  the  energy  produced  at  these  stations. 

It  is  only  a  few  years  ago,  but  a  very  few  years  ago,  as  time 
is  measured,  even  in  a  man's  lifetime,  that  the  Chicago  Edison 
Company  spent  a  large  sum  of  money  in  building  a  generating 
station  on  the  South  Branch  of  the  Chicago  River,  at  the  bridge 
at  West  Harrison  Street,  known  to  most  of  you  as  the  Harrison 
Street  station.  That  station  served  its  purpose,  produced 
energy  supposedly  about  as  cheap  as  it  could  be  produced  at 
that  time.  Today  that  station  is  so  little  a  factor  in  our  busi- 
ness that  I  am  free  to  say  that  I  do  not  know  whether  it  operates 
one  month  in  the  year  or  six  months,  and  I  think  some  years 
it  does  not  operate  at  all.  There  is  a  property  that  cost  be- 
tween $1,500,000  and  $2,000,000  and  which  has  a  little  less 
than  half  the  output  rating  of  the  last  turbo-generator  unit 
that  we  ordered  for  one  of  our  modern  stations.  That  about 
tells  the  story  of  the  generating  side  of  the  business. 

The  ability  to  mass  enormous  production  and  to  do  it  at 
an  economy  of  cost,  so  far  as  investment  and  operating  are  con- 
cerned, with  the  permanency  of  building  and  installation  which 


DISTRIBUTION  OF  ENERGY  419 

it  is  impossible  to  attain  with  smaller  enterprises,  has  brought 
us  to  a  position  where,  anywhere  this  side  of  the  Missouri 
River,  where  coal  is  reasonably  cheap,  energy  can  be  produced 
at  such  low  cost  (it  is  not  necessary  to  go  into  the  figures 
here)  that  we  are  enabled  to  build  an  expensive  distribution 
system  and  sell  that  energy  at  low  cost  not  only  in  very  large 
centers  of  population,  but  in  the  smaller  towns  and  villages 
wherever  the  density  of  population  justifies  the  expenditure 
on  the  distribution  system. 

What  has  led  us  to  desert  the  electric-lighting  business,  so 
to  speak,  and  go  farther  afield  and  turn  our  companies  into 
power  companies,  energy-producing  companies,  offering  to 
sell  their  energy  for  whatever  uses  the  user  may  desire  to  put 
it  to?  Fundamentally  it  is  the  low  load  factor  of  the  lighting 
business.  The  load  factor  of  lighting  of  any  city  in  this  latitude 
is  on  the  average  about  the  poorest  business  that  it  is  possible 
for  an  electric-light  company  to  have.  I  would  not  have  dared 
to  make  that  statement  ten  or  twelve  years  ago,  even  if  I  had 
known  it.  I  don't  think  I  did  know  it  at  that  time;  I  was 
trying  to  persuade  myself  then  that  the  lighting  load  was  very 
good  business  to  have.  Today  I  believe  in  taking  it  because 
it  is  one  of  the  obligations  that  we  have  incurred,  and  that, 
when  taken  in  connection  with  other  lines  of  business,  can  be 
made  profitable.  But,  take  it  by  itself,  it  is  as  poor  a  branch 
of  business  as  any  we  take  on  our  system. 

COMPARATIVE  FIGURES  OF  CHICAGO   ELECTRIC  SERVICE  AND 
THREE  HUNDRED  BRITISH  STATIONS 

I  think  that  is  probably  well  illustrated  by  making  a  com- 
parison between  the  figures  of  upwards  of  three  hundred  of  the 
electric-supply  companies  in  Great  Britain  and  the  figures  of 
the  Commonwealth  Edison  Company.  We  took  the  actual 
population  of  Chicago  as  2,250,283  in  1912,  or,  to  express  it  in 
round  figures,  we  call  it  from  two  millions  and  a  quarter  to  two 
millions  and  a  half,  and  we  compared  that  with  the  population 
of  Great  Britain  in  1911  and  1912,  of  about  24,250,000.  We 


420  ADDRESSES  OF  SAMUEL  INSULL 

compared  the  Commonwealth  Edison  Company's  business, 
in  these  figures  that  I  am  going  to  give  you,  with  the  combined 
business  of  303  British  electricity-supply  undertakings.  Their 
plant  rating  is  961,000  kilowatts;  our  plant  rating  at  the  same 
time  was  264,000  kilowatts.  Their  output  was  1,128,000,000 
kilowatt-hours;  our  output  was  712,000,000  kilowatt-hours. 
Their  income  was  a  little  over  $40,000,000,  ours  a  little  over 
$15,000,000.  Their  investment  was  $310,000,000;  ours  was 
$68,000,000.  With  approximately  one  and  a  half  times  our 
output,  their  investment  was  pretty  nearly  five  times  ours. 
Their  business  is  largely  lighting  business;  our  business  is  a 
general  business,  but  mainly  power  business.  Now  take  the 
investment  per  capita  as  a  test.  They  have  an  investment  per 
capita  of  $12.78;  we  have  an  investment  per  capita  of  $31.24. 
But  their  kilowatt-hours  sold  per  capita  are  46.5  and  our  kilo- 
watthours  sold  per  capita  are  326.  In  other  words,  we  sell 
seven  times  more  kilowatt-hours  per  capita  than  they  do. 
Their  income  is  $1.67  per  capita  and  our  income  is  $7.03.  We 
have  more  than  four  times  as  much  income  per  capita  as  they 
have.  Their  price,  incidentally,  is  about  70  to  80  per  cent  higher 
than  ours,  notwithstanding  the  fact  that  we  have  expensive 
labor  and  they  have  cheap  labor.  They  necessarily  have  cheap- 
er money  than  we  have,  and,  I  think,  lower  taxes. 

Now,  these  figures  illustrate,  no  doubt,  the  difference  be- 
tween a  general  electric-service  business  and  a  mere  electric- 
lighting  business.  I  have  not  any  very  good  information  on 
their  load  factor,  because  they  figure  load  factors  rather  differ- 
ently from  what  we  do.  They  figure  load  factor  on  the  ratio 
of  the  average  kilowatts  sold  to  the  maximum  kilowatt  capacity 
of  their  plants,  and  their  load  factor  shows  about  20  per  cent. 
Our  load  factor  shows  35  per  cent  on  their  basis  of  figuring. 
On  the  American  basis  I  presume  their  load  factor  would  show 
about  25  to  26  per  cent  and  our  load  factor  would  show  about 
42  to  45  per  cent.  That  I  think  about  explains  the  story;  that 
gives  you  about  the  difference  between  an  operating  company 
run  for  lighting  purposes  and  an  operating  company  run  to 
supply  energy  for  every  purpose. 


DISTRIBUTION  OF  ENERGY  421 

ENGINEERS'  PREJUDICE  A  SERIOUS  OBSTACLE 

Let  us  consider  what  combination  of  production  and  dis- 
tribution means.  Take  the  average  large  company  in  this 
country.  I  mention  especially  the  large  companies,  for  the 
small  companies  have  made  greater  advances  in  the  direction 
of  concentration  of  production  and  distribution  than  the 
large  companies.  If  the  average  large  company  does  just  an 
ordinary  lighting  and  an  ordinary  retail  power  business,  its 
load  factor  is  about  30  per  cent.  If  it  does  a  general  business, 
quoting  such  rates  as  will  give  it  a  very  large  output  of  energy 
for  manufacturing  purposes,  for  transportation  purposes,  and 
for  lighting  purposes,  its  load  factor  will  run  about  45  per  cent. 
In  other  words,  the  investment  of  the  company  will  average  to 
be  in  use  50  per  cent  more  time  than  that  of  the  company  which 
runs  its  business  on  the  basis  of  dealing  in  ordinary  retail  light 
and  power.  Increased  load  factor  means  a  relative  decrease 
in  interest  charge  and  almost  a  relative  decrease  in  depreciation 
charge.  The  labor  items  are  not  of  such  serious  consequence, 
although  it  would  mean  a  partially  relative  decrease  in  labor 
charge,  as  labor  is  not  in  proportion  to  load  factor. 

What  are  the  obstacles  to  producing  a  general  system  of 
generation  and  distribution  which  such  figures  would  seem  to 
indicate  as  desirable?  The  most  serious  obstacle,  I  think,  is 
the  question  of  the  engineer.  One  gentleman  explained  it  to 
me  this  morning  as  the  engineer's  caution.  I  told  him  I  thought 
it  was  the  engineer's  prejudice.  I  think  that  is  the  most 
serious  obstacle  we  have  to  deal  with.  To  a  lesser  degree, 
and  dealing  with  the  lower  grade  of  engineers,  we  have  the 
same  prejudice  to  deal  with  where  we  try  to  do  away  with  the 
isolated  plants  that  are  among  us.  I  would  add  to  the  ob- 
stacle of  the  engineer's  prejudice  another  item  —  and  I  must 
ask  those  engineers  who  are  in  this  room  who  are  on  that  side 
of  the  business  to  excuse  me  for  mentioning  it  —  and  that  is 
the  so-called  self-interest  of  the  consulting  engineer.  It  can- 
not be  the  interest  of  the  investor  whom  the  engineer  is  sup- 
posed to  advise,  because  it  is  easy  of  demonstration  as  to 


422  ADDRESSES  OF  SAMUEL  INSULL 

which  is  the  most  economical  course  for  that  investor   to 

pursue. 

Such  conditions  grow  up  over  a  period  of  years.  People 
are  unconscious  of  losing  any  money  and  therefore  they  are 
perfectly  willing  to  continue  to  lose  money.  But  take  the  large 
energy-using  enterprises  of  the  country:  it  does  not  seem  reason- 
able to  suppose  that  the  bankers  who  have  provided  the  money 
would  take  the  position  that  they  do  not  want  that  money 
spent  in  the  most  economical  way  possible;  that  does  not  seem 
a  reasonable  proposition.  It  is  easy  of  demonstration  in  any 
considerable  amount  of  territory  which  carries  over  its  area  a 
considerable  population  that  the  economical  course  is  to  pro- 
duce energy  in  large  quantities.  That  is  as  simple  a  manufac- 
turing proposition  as  producing  lamps  in  large  quantities. 
Then  the  energy  should  be  distributed  over  as  large  an  area  as 
can  be  economically  operated  from  one  center. 

BUT  PREJUDICE  SHOULD  NOT  STAND  IN  THE  WAY  OF 
ECONOMICAL  OPERATION 

This  is  capable  of  demonstration  not  only  from  the  point  of 
view  of  the  large  cities  but  from  the  point  of  view  of  small 
communities.  Take,  for  instance,  the  figures  of  the  northern 
end  of  Illinois,  with  which  I  am  personally  familiar,  not  only 
statistically,  but  with  the  territory,  because  I  live  in  it.  Sev- 
eral years  ago  there  were  isolated  central-station  plants  oper- 
ated separately  with  load  factors  by  themselves  of  13,  14  and 
15  per  cent.  Assuming  the  value  of  those  particular  plants, 
just  the  generating  stations  by  themselves,  at  $175  to  $180  a 
kilowatt,  I  can  show  you  in  that  same  territory,  after  building 
substations  and  transmission  lines  and  increasing  the  invest- 
ment per  kilowatt  over  twice,  that  owing  to  the  changed  con- 
ditions —  the  permanence  of  the  service,  the  low  cost  of  the 
energy  and  the  resulting  increased  power  business  —  the  load 
factor  improved  so  that  today  it  is  practically  28  to  30  per  cent. 
The  business,  from  being  just  a  little  shoestring  business  which 
no  one  would  care  to  give  any  particular  attention  to,  grows 


DISTRIBUTION  OF  ENERGY  423 

to  formidable  proportions,  is  easily  financed,  and  is  put  on  a 
basis  that  is  a  credit  alike  to  the  owners  and  the  users,  and  a 
great  benefit  to  the  territory  that  is  served. 

If  you  extend  the  business  a  little  farther  and  take  in  the 
larger  towns  in  the  territory;  if  you  go  still  farther  south  and 
embrace  a  large  portion  of  the  state,  where  they  use  energy  for 
general  transmission  purposes,  for  interurban  roads,  for  pump- 
ing water  to  drain  the  land  in  one  place  and  to  irrigate  it  in 
another  place,  for  moving  machines  to  cut  the  coal  under- 
ground and  produce  the  manufactured  articles  on  the  surface, 
a  situation  is  produced  where  you  have  a  load  factor,  owing 
to  the  diversity  of  the  various  businesses  using  the  power,  as 
large  as  you  can  get  in  any  large  city  in  this  country. 

These  are  not  mere  theoretical  figures  and  conclusions.  I 
am  responsible  for  probably  $250,000,000  invested  in  the 
business  which  is  operated  broadly  on  the  policy  that  I  have 
been  trying  to  enunciate  to  you  today.  It  is  not  a  policy  that 
is  peculiarly  my  own.  It  is  a  scheme  that  has  been  worked 
out  rather  from  the  bottom  than  from  the  top.  The  week 
before  last  I  traveled  about  1200  miles  by  automobile  through 
New  Hampshire  and  Vermont,  and  I  was  surprised  to  see  the 
number  of  small  transmission  systems  operating  through  that 
territory.  I  was  very  much  surprised  to  see  to  what  an  extent 
all  the  energy  in  a  given  territory  was  produced  from  one 
source.  I  had  thought  that  we  were  doing  more  of  this  class 
of  central-station  work  in  the  Central  West,  and  especially 
in  the  Far  West,  where  they  have  such  large  water-powers,  and 
I  was  very  agreeably  surprised  to  see  how  much  of  it  is  being 
done  in  the  old-fashioned  East. 

I  see  no  reason  why  the  prejudice  of  an  engineer  who  de- 
sires to  have  the  largest  possible  units  in  his  company's  generat- 
ing station  should  stand  in  the  way  of  the  economical  operation 
of  the  properties  under  his  control.  I  see  no  reason  why  you 
should  have  a  transmission  system  twenty  or  thirty  feet  above 
the  ground,  another  one  on  the  ground  and  another  one  twenty 
or  thirty  feet  under  the  ground,  and  still  a  fourth  one  running 
parallel  with  that,  each  operating  separately  as  is  the  case  in 


424  ADDRESSES  OF  SAMUEL  INSULL 

New  York.1  We  fortunately  live  in  a  country  where  we  have 
not  reached  the  point  of  saturation,  and  where  the  possibilities 
of  our  business  are  tremendous.  There  is  not  any  great  differ- 
ence between  our  business  and  the  transportation  proposition. 
You  take  any  large  city  of  the  United  States,  and  every  new 
scheme  of  urban  transportation  that  is  laid  out  is  practically 
filled  and  overflowing  before  it  comes  into  use. 

It  is  the  same  with  our  business.  Before  we  can  build  a 
generating  station  we  have  the  customers  to  absorb  the  energy 
that  that  station  produces.  A  unification  of  the  power  gen- 
eration and  distribution  in  the  large  cities  and  in  the  country 
districts,  especially  in  the  manufacturing  country  districts, 
would  have  the  effect  of  releasing  a  very  large  amount  of 
capital  temporarily.  I  do  not  mean  to  say  that  it  is  capital 
that  would  go  into  the  bank;  it  would  be  very  largely  in  the 
shape  of  copper.  It  would  take  but  a  few  years  for  that  to  be 
absorbed  by  increased  uses,  and  the  service  could  be  given 
cheaper.  Or,  if  it  is  cheap  enough  now,  and  there  is  not  a  suf- 
ficient return  being  obtained  on  the  investment,  a  greater 
return  could  be  obtained  from  the  investment. 

THE  FUTURE  OF  ENERGY  DISTRIBUTION 

I  am  expected  to  say  something  about  the  future  of  the 
distribution  of  energy.  It  is  a  little  dangerous  to  predict 
what  is  likely  to  happen.  I  am  absolutely  positive  that  the 
necessity  for  the  conservation  of  the  fuel  resources  of  this 
country  will  force  the  concentration  of  the  production  of  energy. 
Tomorrow  Mr.  Vanderlip2  is  going  to  talk  to  you  on  the  financial 
outlook,  and  I  presume  he  will  have  something  to  say  of  the 
enormous  sums  of  money  required  by  the  electrical  business  to 
finance  it  properly.  I  think,  when  you  have  listened  to  the 
figures  which  he  must  necessarily  use,  that  you  will  come  to 
the  conclusion  that  the  economical  financing  of  this  great  busi- 

1.  Alluding    to    the    elevated-railway,    surface-railway,    subway-railway 
and  central-station  electricity-supply  distributions. 

2.  Mr.  Frank  A.  Vanderlip,  president  of  the  National  City  Bank  of  New 
York. 


DISTRIBUTION  OF  ENERGY  425 

ness  in  the  future  will  force  the  concentration  of  the  production 
and  distribution  of  energy  over  such  areas  of  our  country  as 
have  great  density  of  population. 

It  looks  to  me  as  if  we  are  approaching  an  era  when  the 
business  of  producing  and  distributing  energy  will  come  into  its 
own.  You  all  know  the  vivifying  effect  on  business  of  a  given 
territory  from  the  development  of  first-class  transportation 
systems.  Picture  to  yourself  what  must  take  place  in  this 
country,  certainly  east  of  the  Mississippi  River,  from  the  de- 
velopment of  general  systems  of  energy  distribution.  To  my 
mind  this  territory  will  be  a  network  of  lines  for  transporting 
electrical  energy.  And  when  that  time  comes,  energy  will 
be  purchased  as  energy;  it  will  be  used  for  whatever  purposes 
it  may  be  required,  such  as  in  transportation,  in  the  homes 
of  our  people,  and  in  our  manufacturing  establishments.  Our 
great  trunk  lines  of  transportation,  certainly  within  fifty  or 
sixty  miles  of  their  termini,  will  be  purchasing  that  power 
to  operate  their  trains.  Electrical  energy  will  perform  the 
same  functions  for  the  whole  community,  whether  in  the  great 
cities  or  in  the  hamlets  and  villages,  that  the  small  water-powers 
of  New  England  perform  for  the  small  communities  in  which 
those  water-powers  were  established. 

There  is  another  side  of  this  matter  that  it  is  well  for  us  to 
consider.  While  I  suppose  most  of  us  engaged  in  this  business 
are  fascinated  by  its  constructive  possibilities,  after  one  reaches 
a  certain  point  one  likes  to  feel  that  besides  doing  his  duty 
to  his  associates  and  to  those  who  entrust  him  with  their 
money,  he  is  contributing  something  to  the  progress  of  the 
country  in  which  he  lives  and  of  the  people  among  whom  he 
has  his  abiding  place.  I  think  it  is  a  great  privilege  to  us  in 
this  business — of  course  I  naturally  refer  especially  to  us  on  the 
operating  side  of  it  —  that  we  are  engaged  in  a  business  that 
has  such  great  possibilities,  not  only  of  results  to  ourselves 
and  our  stockholders  but  in  the  great  advantages  that  this 
business  is  capable  of  bringing  to  the  people  of  this  country, 
and  the  great  part  it  must  take  in  the  future  in  the  solution  of 
some  of  the  great  industrial  problems  with  which  this  country 


426  ADDRESSES  OF  SAMUEL  INSULL 

is  confronted.  Providing  that  labor  can  be  secured,  I  do  not 
think  it  is  at  all  a  wild  statement  to  say  that  in  relatively  few 
years  there  will  be  very  few  parts,  certainly  of  the  eastern 
states  and  the  central  western  states,  where  energy  cannot  be 
bought  at  such  prices  as  will  enable  a  manufacturer  to  operate 
his  plant  economically,  either  in  the  smallest  community  or  in 
the  largest  center  of  population.  It  is  that  point  to  which  I 
am  trying  to  work  wherever  I  am  operating,  more  especially 
in  the  great  state  of  Illinois,  which  has  been  so  kind  to  me  for 
the  last  quarter  of  a  century.  My  main  reason  for  coming  here 
is  not  to  give  you  any  new  message,  but  to  try  to  bring  home 
to  you  the  truths  that  come  to  me  every  day  when  I  am  running 
my  business  at  home;  namely,  that  there  is  only  one  possible 
way  to  develop  this  business  to  great  permanent  success,  and 
that  is  on  a  basis  of  low  cost  of  production,  a  minimum  cost  of 
distribution  and  a  minimum  selling  price  to  the  community. 


ELECTRICAL  SECURITIES1 

WHEN  I  was  asked  to  talk  to  you  on  the  subject  of 
electrical  securities  I  was  somewhat  at  a  loss  to 
know  exactly  what  branch  of  that  question  to  discuss 
before  you.  If  I  were  talking  to  some  of  my  friends  —  and  I 
am  glad  to  say  that  I  think  I  count  among  my  friends  the  in- 
vestment bankers  of  this  city  —  I  should  probably  deal  with 
the  question  of  trust  deeds  and  the  desirability  of  making 
them  as  liberal  as  possible  to  the  companies  putting  out  the 
securities,  and  of  the  extreme  necessity  of  that  liberality  in 
order  to  protect  the  borrower  in  time  of  stress.  But  as  that 
branch  of  the  subject  is  more  or  less  of  a  controversial  one,  it 
occurred  to  me  that  what  would  probably  interest  you  more 
would  be  to  hear  my  point  of  view  as  to  what  should  be  the 
character  of  the  property  and  the  character  of  the  operation  of 
the  property  covered  by  a  mortgage. 

I  do  not  mean  that  you  should  infer  that  my  opinion  is 
that  as  investment  bankers  you  are  alone  interested  in  prior- 
lien  securities.  If  those  securities  are  to  command  high  credit, 
they  must  have  behind  them  junior  securities  conservatively 
issued  bearing  a  close  relation  to  the  money  invested  in  the 
property,  to  the  gross  income,  and  also  to  the  net  income  of  the 
property  over  and  above  the  prior-lien  charges.  But,  as  your 
point  of  view  is  mainly  that  of  the  bond  dealer,  I  shall  not  have 
much  to  say  about  junior  securities. 

There  is  no  necessity  of  my  trying  to  give  you  information 
as  to  what  should  be  the  character  of  the  communities  in  which 

1.  An  address,  somewhat  condensed,  given  on  October  30,  1913,  at  the 
convention  of  the  Investment  Bankers'  Association  of  America,  held  in  the 
Blackstone  Hotel,  Chicago.  It  was  during  the  progress  of  this  speech  that 
Mr.  Insull  gave  utterance  to  the  epigrammatic  expression  describing  "a  greater 
saturation  of  the  dollar  invested  with  the  electrical  energy  produced." 

427 


428  ADDRESSES  OF  SAMUEL  INSULL 

these  securities  are  issued  and  the  necessity  of  having  ample 
population,  high  purchasing  power  of  the  people  in  the  territories 
served,  or  the  necessity  of  having  large  industrial  development 
to  produce  the  necessary  income  to  protect  the  securities. 
That  subject  you  are  far  more  familiar  with  than  I  am  myself. 
My  intention  is  to  show  you  something  of  the  operation  of  the 
electric-light-and-power  business  in  this  immediate  territory. 

The  subject  to  my  mind  can  be  presented  to  the  best 
advantage  graphically,  and  I  shall  therefore  show  curve  sheets 
and  tables  which  will  tell  their  own  stories  to  a  large  extent 
and  require  relatively  but  little  explanation  from  me. 

Two  KINDS  OF  ENGINEERING,  AND  THEIR  VALUE 

Assuming  that  the  property  is  there  on  which  the  securities 
are  issued,  and  that  the  necessary  money  has  been  provided  for 
the  development  of  the  business,  the  matter  of  real  fundamental 
importance  in  connection  with  its  operation  is  engineering. 

There  are  two  classes  of  engineering  that  we  have  to  use  in 
our  business.  There  is  the  mechanical  and  electrical  engineer- 
ing, the  engineering  of  construction,  on  the  one  side,  and 
first-class  selling  engineering,  the  engineering  that  governs  the 
getting  of  business,  on  the  other  side.  Thus,  it  matters  not  how 
much  money  has  been  put  into  a  property,  or  how  conservative- 
ly the  securities  may  have  been  issued,  or  how  good  is  the 
prospect  of  business  in  the  community,  unless  the  engineering 
of  construction  is  laid  out  on  the  most  enlightened  lines,  good 
results  will  not  follow.  [Mr.  Insull  illustrated  this  statement 
by  using  the  "  conservation-of-coal "  diagram,  which,  brought 
down  later,  is  given  in  the  next  chapter,  page  469.] 

Having  true  engineering  of  construction  as  a  basis,  we  come 
to  another  side  of  the  business;  that  is,  the  engineering  of  selling. 
Fig.  1  shows  that,  starting  in  1896  with  a  gross  business  of  about 
$1,000,000,  and  increasing  year  by  year,  we  had  in  1912  a  total 
business  of  $15,500,000,  divided  as  follows:  Light,  a  little 
over  $8,000,000;  power  a  little  below  $4,000,000,  and  the  supply 
of  energy  for  transportation  purposes  a  little  below  $4,000,000. 


ELECTRICAL  SECURITIES 


429 


It  is  interesting  to  note  how  closely  the  output  figures 
(Fig.  2)  follow  the  figures  of  money.  Referring  again  to  the 
curves  of  Fig.  1,  you  will  notice  that  they  follow  very  closely 
similar  lines  as  shown  on  Fig.  2,  so  far  as  the  total  is  concerned, 
but  with  a  much  sharper  line  so  far  as  railways  are  concerned. 
The  cause  of  the  difference  between  those  two  curves,  that  is,  the 


DIAGRAM 

SHOWING   EARNINGS 
FROM  SALES  OF 

ELECTRICITY 
YEARS  1895  to  1912 


$10,000,000 


$12,000,000 


$10,000,000 


$8,000.000 


$6,000.000 


1900        1902        1904 
YEARS  ENDING    DECEMBER  31 

Fig.  1.     Results  in  Chicago 

money  curve  and  the  output  curve,  is  the  fact  that  in  the  de- 
velopment of  our  business  we  have  probably  carried  to  a  greater 
extent  than  the  majority  of  electric-service  corporations  the 
wholesaling  of  our  energy,  as  is  especially  shown  with  relation 
to  the  output  of  energy  for  transportation. 

This  is  illustrated  again  by  this  dollars-and-cents  diagram 
(Fig.  3)  with  relation  to  income  per  kilowatt-hours  sold. 


430  ADDRESSES  OF  SAMUEL  INSULL 

The  income  from  light  shows  a  steady  drop  per  unit  sold 
from  1898  to  1912,  amounting  to  about  40  per  cent  in  price  per 

800,000,000 


300,000.000 
200,000,000 
100,000,000 


1904  1906 

CALENDAR     YEARS 

Fig.  2.    Results  in  Chicago 

kilowatt-hours  sold.  The  power  income  follows  somewhat 
the  same  curve.  It  started  at  a  lower  price  and  necessarily 
ends  at  a  lower  price.  The  wholesaling  of  energy  for  transpor- 
tation purposes  runs  along  on  a  very  steady  line.  In  the  first 

c\°, 


INCOME  PER 
KILOWATT  HOUR  SOLD 


JU. 

SL 
JU. 
&. 
ft* 

A,. 

p, 

cV 


Fig.  3.    Results  in  Chicago 


ELECTRICAL  SECURITIES 


431 


three  years  the  price  did  not  vary.  As  the  business  developed 
the  price  dropped  in  1906,  and  that  price  continues  practically 
up  to  the  present  time  and  is  on  a  basis  lower  than  it  is  possible 
for  the  local  transportation  companies  of  this  city  to  produce 
their  energy  themselves. 

Fig.  4  shows  another  result  of  combining  commercial 
engineering  and  the  engineering  of  inventions.  This  diagram 
gives  you  the  amount  of  electric  light  that  could  be  bought  for 

10,000 
9.000 
8.000 
7,000 
6.000 
5.000 
4.000 
3.000 
2,000 
1.000 


Fig.  4 

one  dollar  in  1886,  running  absolutely  even  until  1898.  Then 
the  number  of  candle-hours  was  increased.  Now,  partly  from 
the  lowering  of  prices  and  partly  from  improvements  in  in- 
ventions, the  lamp  efficiency  having  increased  268  per  cent  and 
the  rate  having  decreased  61.5  per  cent,  the  amount  of  electric 
light  that  can  be  bought  for  one  dollar  has  increased  enormously.1 
That  to  my  mind  shows  the  fundamental  principles  govern- 
ing this  great  business  and  affecting  the  value  of  securities 
issued  better  than  any  curve  that  I  can  present  to  you.  The 
improvement  in  efficiency  is  a  tribute  to  the  genius  of  the  great 
inventors  the  world  over,  and  the  decrease  in  rate  is  a  tribute  to 

1.  See  also  Fig.  30  of  the  chapter  on  "A  Quarter-Century  Central-Station 
Anniversary  Celebration  in  Chicago,"  page  327. 


AMOUNT  OF  ELECTRIC  LIGHT 
THAT  ONE    DOLLAR  WOULD   BUY 
YEARS   1886  TO   1913 
EXPRESSED  IN  CANDLE  HOURS 

TUN 

LAMPS 

rr 

3STEN 

AMPS 

r 

— 

T-f 

LAMP   EFFICIENCY    INCRE 
RATE   DECREASED  61 

CARBON   LAMPS 

KSED   268% 
5  % 

ALUM 

J 

— 

-    UJ 

I 

\ 

1 

1SS6 

IS'J 

\ 

1E05  19( 

1809   1911    1913 

432  ADDRESSES  OF  SAMUEL  INSULL 

the  ability  of  the  selling  engineers  of  the  various  corporations  of 
this  country.  That  curve  would  not  vary  very  much  in  any 
large  center  of  population  in  the  United  States. 

The  lowering  of  rates  has  been  brought  about  by  means  of 
hearty  co-operation  on  the  part  of  the  selling-engineering  talent 
of  all  our  great  companies  throughout  the  country.  The  im- 
provement in  lamp  efficiency  has  taken  place  following  the 
marvelous  inventions  of  Mr.  Edison,  whose  name  stands  at 
the  head  of  our  industry,  and  whose  work  has  been  supple- 
mented by  that  of  many  other  inventors,  both  in  this  country 
and  on  the  other  side  of  the  ocean. 

This  question  of  commercial  engineering  has  a  very  im- 
portant bearing  on  a  third  important  point,  insofar  as  the 
character  of  the  securities  that  you  are  dealing  in  is  concerned. 
I  refer  to  the  relations  with  our  customers  and  the  relations 
with  the  communities  in  which  the  business  is  operated. 

In  Fig.  5  is  shown  the  highest  rates  charged  in  forty-three 
large  cities  in  the  United  States.  They  are  for  dwelling  houses, 
stores,  manufactories,  all-night  establishments  and  so  on,  and 
without  any  reference  whatever  as  to  whether  the  energy  is 
produced  from  steam  or  from  hydro-electric  plants.  The  curves 
represent  what  the  companies  charge  for  energy  without  ref- 
erence to  the  cost  of  the  product.  The  second  one  shows 
the  average  of  the  forty-three  large  cities.  The  Chicago  rates 
are  shown  in  the  third  curve  and  the  minimum  rates  of  the 
forty-three  large  cities  is  shown  in  the  lowest  curve. 

The  branch  of  commercial  engineering  to  which  I  have 
given  particular  attention  during  the  last  ten  years  is  that  of 
wholesaling  energy  in  very  large  quantities.  Backed  by  the 
courage  of  a  body  of  investors  who  have  stood  behind  me  for 
upwards  of  twenty  years  in  developing  the  business  here  in 
Chicago,  ever  ready  to  provide  funds,  so  that  starting  with 
$1,000,000  we  have  got  to  a  point  where  we  have  between 
$70,000,000  and  $80,000,000  invested  in  the  business,  we  have 
been  able  to  try  a  great  many  experiments  here  in  selling  energy, 
some  of  which  have  been  very  much  criticized.  As  a  result  we 
have  been  able  to  bid  for  classes  of  business  not  ordinarily 


ELECTRICAL  SECURITIES 


433 


supposed  to  be  handled  by  electric-light-and-power  companies, 
who,  as  a  rule,  deal  with  retail  business.  What  we  are  aiming 
at,  and  probably  what  everybody  else  is  aiming  at,  is  to  get  the 
greatest  possible  amount  of  output  for  the  least  possible  amount 
of  investment.  One  of  the  great  difficulties  in  connection  with 
the  financing  of  the  electric-light-and-power  industry,  and  in 
connection  with  the  sale  of  its  product,  is  that  it  is  impossible 
to  store  our  product  economically.  In  that  respect  we  are 


tt  12 

DCtS. 

I 


COMMONWEALTH   EDISON  COMPANY 

LIGHTING  RATES 

COMPARED  WITH  RATES  OF 

43  LARGE  CITIE 


CE    DWEILIN 


Fig.  5.     A  Comparison  of  1913 

at  a  decided  disadvantage  as  compared  with  the  generation 
and  distribution  of  gas.  As  you  all  know  we  have  to  make  our 
product  at  the  same  moment  that  it  is  sold,  so  that  the  problem 
before  the  commercial  engineer,  who  is  desirous  of  getting  the 
greatest  possible  income  out  of  his  investment  and  to  make  the 
best  possible  showing  for  his  securities  at  the  lowest  possible 
charge  for  energy,  is  to  keep  that  investment  working  for  as 
many  hours  of  the  day  and  days  of  the  week  as  it  is  possible 
to  do  with  due  regard  for  safety  of  operation  and  permanency 
of  service. 

The  great  point  that  we  all  have  to  overcome  is  the  maxi- 
mum-load peak.  We  have  to  make  the  investment  necessary 
to  take  care  of  that,  and  the  problem  before  us  is  to  fill  up  the 
valleys  in  the  load  curve.  At  the  prices  we  get  for  energy  in 


434  ADDRESSES  OF  SAMUEL  INSULL 

this  community,  if  we  could  not  fill  up  the  valleys  to  a  large 
extent  I  doubt  very  much  whether  we  could  pay  interest  upon 
our  funded  debt,  notwithstanding  the  fact  that  all  of  our 
junior  securities  are  represented  by  cash  invested  to  the  amount 
of  about  $120  for  every  $100  of  stock  issued. 

We  started  out  to  fill  up  the  valleys  more  than  is  ordinarily 
done.  By  1912  we  had  broadened  the  peak  and  partially 
filled  up  the  valleys  and  had  put  ourselves  in  a  position  so  that 
we  were  using  our  investment  31  per  cent  more  of  the  time  than 
we  were  using  it  in  1902.  First-class  commercial  engineering 
is  of  primary  importance  in  developing  electrical  industries. 
The  advantage  of  using  your  investment  25  per  cent  more  than 
the  other  man  is  able  to  use  his  investment  makes  the  difference 
between  ordinary  earnings  on  the  dollar  invested  and  very 
favorable  earnings  on  the  dollar  invested.1 

Practically  the  greatest  items  of  expense  that  we  have  to 
deal  with  are  interest,  and  to  a  less  extent  depreciation,  and 
these  are  the  controlling  influences  with  relation  to  rates.  It 
is  not  the  price  of  coal,  nor  the  price  of  labor:  it  is  the  price  of 
money  that  governs;  and  if  you  are  only  using  that  money  42 
per  cent  of  the  time  the  cost  of  money  per  unit  of  output  must 
be  very  materially  greater  than  if  you  use  that  money  55  per 
cent  of  the  time.  To  you  as  bankers  that  is  a  self-evident 
proposition. 

I  think,  if  I  had  to  choose  between  first-class  construction 
engineering  and  first-class  selling  engineering,  inasmuch  as  the 
possibility  of  mistake  is  far  greater  in  the  selling  side  of  the 
business  than  in  the  construction  side  of  the  business  —  if  I 
had,  as  I  say,  to  choose  between  the  two  I  would  choose  first- 
class  selling  engineering,  as  it  would  give  me  more  money  on  the 
dollar  invested  with  which  to  make  up  for  the  mistakes  made 
by  the  constructing  engineer.  Consequently,  to  my  mind,  the 
item  of  paramount  importance  to  you  is  not  the  replacement 
value  of  the  central  station;  it  is  not  the  replacement  value  of 
the  electric-power-distribution  system.  The  matter,  to  my 

1.  See  curves  in  Fig.  14  of  chapter  on  "The  Relation  of  Central-Station 
Generation  to  Railroad  Electrification,"  page  280. 


ELECTRICAL  SECURITIES 


435 


mind,  as  an  operating  man,  paramount  in  importance  to  you 
gentlemen  is  that  the  selling  organization  of  the  companies 
with  which  you  deal  should  be  of  the  highest  possible  order. 
And  when  dealing  with  the  securities  of  public-service  com- 
panies, you  should  see  to  it  that  their  engineering  methods 
are  of  the  most  enlightened  nature,  so  far  as  the  selling  of  their 
product  is  concerned. 


SOURCE  OF 
CAPITAL  FOR 
ADDITIONS  TO 


YEARS 

Fig.  6.     Results  in  Chicago 


WHERE  THE  CAPITAL  COMES  FROM 

The  curves  in  Fig.  6  give  you  some  information  as  to  where 
the  capital  comes  from  to  increase  the  facilities  of  a  large 
organization.  It  covers  the  period  from  1908  to  1912,  and,  in 
part,  1913.1  The  dotted  line  shows  the  money  supplied  by 
new  capital.  The  lower  solid  line  shows  the  money  supplied 
out  of  surplus,  various  reserve  accounts,  replacement  accounts, 
depreciation  accounts.  And  the  upper  line  shows  you  the  total 
expenditures  for  capital  account  over  the  period.  It  is  not 
possible  for  all  organizations  to  show  that  relationship.  There 
are  a  good  many  first-class  electricity-supply  organizations  in 
this  country  where  the  relation  of  new  capital  used  to  capital 

1.  Since  the  delivery  of  this  address  the  diagram  has  been  made  complete 
for  the  years  covered. 


436 


ADDRESSES  OF  SAMUEL  INSULL 


supplied  out  of  the  operation  of  the  business  is  very  much 
closer  than  in  this  case.  I  simply  show  this  curve  to  give  you 
an  idea  of  what  can  be  done  in  a  large  organization;  to  show 
you  what  a  large  proportion  of  money  obtained  from  the 
operation  of  the  business  goes  into  the  improvement  of  your 
security,  namely,  the  investment  in  a  plant  and  distribution 
system. 

The  tendency  of  that  curve,  if  plotted  for  all  the  companies 
whose  securities  you  gentlemen  sell,  or,  certainly,  for  90  per 


YEARS 

Fig.  7.     Results  in  Chicago 

cent  of  the  companies  whose  securities  you  sell,  while  it  might 
not  show  the  same  proportions,  would  be,  in  general,  the  same. 
So  far  as  I  know,  there  is  no  branch  of  industrial  work  in 
which  the  tendency  toward  conservatism,  so  far  as  charging 
to  capital  is  concerned,  is  so  great  as  in  the  electric-light-and- 
power  business  of  this  country.  This  comes  from  a  number  of 
causes  —  partly  from  the  effect  of  first-class  engineering  and 
partly  from  a  greater  realization  on  the  part  of  people  operating 
properties  that  their  tendency  should  be  toward  greater  care 
as  to  charges  against  investment  account,  with  a  realization  of 
the  great  necessity  for  reserve  accounts.  This  increased  con- 
servatism comes  from  a  greater  knowledge  of  the  business  on  all 
sides  of  it. 


ELECTRICAL  SECURITIES 


437 


I  am  dwelling  on  this  subject  of  investment,  or  spending  of 
money  for  investment  in  relation  to  the  selling  of  the  product, 
to  an  extent  that  you  may  probably  think  is  somewhat  irksome; 
but  it  is  so  important  that  I  have  tried  to  express  this  same  thing 
in  another  way  in  the  curves  of  Fig.  7.  We  start  in  1898  with 
not  much  over  5,000  customers  and  end  in  1912  with  180,000 
customers.1  In  1898  our  investment  per  customer  was  $1,579, 
and  our  gross  income  per  customer  was  $210.  In  1912  that 
investment  dropped  to  $417  per  customer,  and  the  income  had 


Fig.  8.     Results  In  Chicago,  Showing  Relation  of 
Cost  to  Income 

dropped  to  $87  per  customer.  While  steadily  reducing  our 
price  and  endeavoring  to  put  ourselves  in  closer  accord  with 
our  customers,  we  have  at  the  same  time  produced  a  greater 
saturation  of  the  dollar  invested  with  the  electrical  energy 
produced  and  reduced  the  investment  to  $417  per  customer. 
Improvement  in  that  period  shows  that  the  relation  of  income 
to  investment  in  1898  was  13.33  per  cent,  and  in  1912  was  21 
per  cent,  with  the  necessarily  accompanying  result  of  a  steady 
increase  in  net  income  from  operation. 

In  Fig.  8  are  other  curves  bearing  on  practically  the  same 

1.  The  number  of  customers  of  the  Commonwealth  Edison  Company  on 
February  1,  1915,  was  about  254,000. 


438  ADDRESSES  OF  SAMUEL  INSULL 

subject.  They  show  that  the  cost  of  energy  per  kilowatt-hour 
sold  in  1896  was  about  12  cents  per  kilowatt-hour  and  our 
income  was  a  little  over  10  cents  a  kilowatt-hour,  and  yet  we 
were  paying  our  stockholders  8  per  cent  on  their  stock.  There 
were  two  causes  for  this  anomalous  condition  of  affairs.  At 
that  time  we  made  large  profits  from  merchandizing  electri- 
cal apparatus.  The  people  in  control  of  the  management  of 
the  property  at  that  time  laid  more  stress  on  selling  apparatus 
than  on  selling  energy,  and  I  am  sorry  to  say  I  was  at  the  head 
of  the  organization.  That  is  one  cause.  Another  cause  is 
that  in  1896,  about  a  decade  and  a  half  ago,  we  knew  so  little 
about  our  business  that  we  did  not  know  how  to  figure  our  cost. 
If  we  had  known  how  to  figure  our  cost,  we  might  have  had 
greater  anxiety  as  to  the  outcome.  In  Fig.  8  there  is  also  a 
line  showing  the  income  per  kilowatt-hours  sold,  and  you  will 
find  extremely  close  relationship  between  the  two  curves  of 
cost  and  selling  price,  illustrating  the  steady  policy  of  reducing 
our  rates.  The  "total-investment"  line  shows  the  growth  of 
our  investment  from  less  than  $8,000,000  up  to  about  $80,000,- 
000.  Another  line  gives  our  output,  starting  at  11,000,000 
and  going  up  to  712,000,000  of  kilowatt-hours  sold. 

You  will  notice  that  in  the  earlier  period,  when  we  knew  far 
less  about  commercial  engineering  than  we  know  today,  the 
output  and  investment  ran  right  along  on  parallel  lines.  It 
was  less  than  ten  years  ago  that  we  began  to  change.  You 
will  note  in  later  years  we  have  kilowatt-hours  shooting  up  while 
total  investment  keeps  on  relatively  even  keel.  That  partic- 
ular curve  is  very  easily  worked  out  for  any  large  or  small 
electricity-supply  company,  whether  it  be  a  lighting  company 
or  a  power  company  or  a  diversity  of  both  businesses,  if  records 
have  been  kept. 

If  I  were  judging  of  the  character  of  securities,  I  would  lay 
greater  stress  on  the  general  information  which  can  be  obtained 
from  such  a  curve  sheet  as  to  the  business  policy,  the  ability 
to  sell  the  product  properly,  and  the  ability  to  get  the  best 
results  out  of  the  smallest  amount  of  money  invested.  I 
would  be  more  influenced  by  the  general  policy  of  the  adminis- 


ELECTRICAL  SECURITIES  439 

tration  of  that  business  as  shown  by  such  a  curve  sheet  than  by 
almost  any  other  information  I  could  obtain. 

As  TO  THE  SCRAPPING  OF  SMALL  PLANTS 

The  figures  I  have  given  you  so  far  relate  to  a  large  central 
power  station  and  distribution  system  capable  of  supplying 
energy  for  a  community  of  perhaps  2,500,000  population.  The 
experience  that  we  have  obtained  in  this  community  of  the 
relation  of  one  class  of  business  with  another,  and  the  ad- 
vantages to  be  obtained  from  a  great  diversity  of  business,  has 
led  us  farther  afield.  [The  speaker  then  explained  the  pos- 
sibilities of  concentrating  the  energy  supply  for  the  power- 
using  utilities  (except  trunk-line  railroads)  of  the  state  of 
Illinois,  outside  of  Cook  County,  as  given  in  the  Franklin  In- 
stitute paper  on  "The  Production  and  Distribution  of  Energy."] 

Naturally,  it  may  occur  to  the  minds  of  some  of  you  gentle- 
men that  all  these  small  plants  exist;  that  they  are  all  doing 
some  business,  and  that  if  they  are  thrown  away  and  large 
centralized  plants  are  built  to  take  their  place,  you  are  wiping 
out  capital  on  which  securities  have  been  issued.  Theoretically, 
that  is  correct.  But  the  facts  are  these:  There  is  scarcely 
a  small  community  in  the  Central  West  where  any  business  is 
done  except  street  lighting  and  house-to-house  lighting,  and 
perhaps  the  pumping  of  the  water  locally.  The  cost  of  produc- 
tion is  so  high  that  these  small  plants  cannot  possibly  sell 
energy  for  industrial  or  transportation  purposes. 

These  plants  must  disappear.  They  are  bound  to  be 
wiped  out.  The  business  of  generating  energy  for  use  in  the 
communities  that  they  serve  must  be  taken  over  by  a  large 
establishment,  having  economical  apparatus  in  the  form  of 
generating  plants  connected  with  large  distributing  systems. 
It  will  then  be  possible,  in  these  small  communities,  to  distribute 
economically  energy  for  transportation  and  manufacturing 
purposes.  By  that  means  the  value  of  the  investment  in  small 
local  distribution  systems  will  be  increased  by  broadening  the 
usefulness  of  these  systems.  This  will  help  to  preserve  the 


440  ADDRESSES  OF  SAMUEL  INSULL 

integrity  of  the  securities  that  a  great  many  of  the  investment 
bankers  have  taken  on  the  small  plants  throughout  the  country. 

It  is  the  recognition  of  the  economies  of  this  principle  of 
concentration  which  has  led  some  of  us  to  go  farther  afield 
in  our  business  and  not  only  deal  with  the  large  communities 
but  also  with  smaller  communities  by  uniting  a  number  of  small 
communities  in  one  large  distribution  system  fed  by  one  or 
more  generating  plants. 

This  side  of  the  business  has  other  things  to  recommend  it. 
As  a  rule,  country  plants  are  badly  run,  badly  constructed; 
and  their  absorption  by  large  systems  means  better  service 
for  the  various  communities  served  at  lower  prices,  and  con- 
sequently increased  popularity  on  the  part  of  the  operating 
company. 

THE  FINANCING  OF  HOLDING  COMPANIES 

The  recognition  of  the  great  advantage  of  diversity  of  load 
has  led  to  the  establishment  of  large  operating  companies,  some 
of  them  being  holding  companies  with  separate  subsidiary 
operating  companies.  In  speaking  on  this  subject  I  am  com- 
ing back  to  what  I  consider  the  interest  of  the  investment  banker 
in  junior  securities,  just  as  much  as  it  is  of  interest  to  the  na- 
tional banker  or  private  banker  to  know  what  is  the  general 
credit  and  general  standing  of  the  individual  he  loans  money 
to,  even  if  in  loaning  that  money  he  has  ample  collateral  security 
for  the  loan  made. 

The  great  danger  of  the  holding-company  proposition  is 
the  issue  of  junior  securities  of  subsidiary  companies,  these 
junior  securities  being  sometimes  put  into  collateral  trusts  of 
the  holding  company  for  the  purpose  of  creating  collateral 
for  so-called  prior-lien  securities  of  the  holding  company.  If 
the  deed  of  trust  underlying  the  collateral-trust  securities  is 
rigid  enough  to  protect  the  purchaser  of  those  securities  against 
the  creation  of  large  floating  debt  in  the  operating  company, 
and  if  the  bond  issue  of  the  operating  company  is  small  and  is  a 
closed  issue,  there  is  no  reason  why  the  stocks  of  operating 
companies  should  not  be  put  up  as  security  for  collateral-trust 


ELECTRICAL  SECURITIES  441 

bonds  of  holding  companies.  That  is  a  side  of  electric  financing 
which,  to  my  mind,  deserves  the  very  serious  thought  of  you 
investment  bankers.  The  mere  creation  of  so  much  paper 
does  not  add  any  more  to  the  actual  cash  invested  in  the 
companies,  and  when  you  are  considering  electrical  securities 
you  ought  to  be  fully  informed  as  to  the  value  of  the  property 
mortgaged,  the  relation  of  that  value  to  the  securities  issued 
and  to  the  gross  and  net  income  of  the  property.  If  the  spread 
between  the  gross  and  net  income  is  very  great,  you  ought  to 
look  most  carefully  into  the  relation  that  the  company  issuing 
the  securities  holds  towards  its  customers  and  the  communities 
in  which  it  operates  with  a  view  to  finding  out  whether  the 
company  is  exacting  an  excessive  price  for  its  product. 

BANKERS  AND  UTILITY  MEN  SHOULD  NOT  OPPOSE  REGULATION 

A  subject  that  has  been  referred  to  here  to  quite  a  large 
extent,  as  I  judge  from  some  of  your  committee  reports,  is 
the  question  of  regulation  —  local  regulation  and  state  regula- 
tion of  the  public-service  industry.  Personally,  I  think  that 
state  regulation  is  the  best  thing  that  can  possibly  happen  to 
this  industry.  Talking  in  another  hotel  in  this  city  not  far 
from  this  spot,  in  my  presidential  address1  to  the  National 
Electric  Light  Association,  on  June  7,  1898,  I  stated  that 
"Public  control  of  charge  for  service,  based  on  cost  plus  a 
reasonable  profit,  and  eliminating  the  factor  of  competition, 
is  the  proper  safeguard  for  the  interests  of  users,  taxpayers  and 
investors."  I  am  still  of  the  same  opinion.  So  far  as  I  have 
seen,  in  almost  every  case  where  regulating  commissions  have 
been  created,  while  there  may  have  been  isolated  cases  of 
injustice  to  one  or  another  of  the  companies  regulated,  generally 
speaking  the  results  obtained  have  been  good  for  the  industry, 
have  been  good  for  the  securities,  and  have  been  good  for  the 
people  of  the  communities  in  which  we  operate. 

1.  Reprinted  in  this  collection  under  the  title  "Standardization,  Cost 
System  of  Rates,  and  Public  Control."  The  sentence  quoted  will  be  found  on 
page  47. 


442  ADDRESSES  OF  SAMUEL  INSULL 

I  would  venture  to  say,  gentlemen,  that  in  the  principal 
cases  where  regulation  has  been  apparently  unfriendly  to  a 
property,  if  you  could  trace  the  management  of  that  property, 
you  would  find  that  the  people  in  control  of  it  had  not  a  proper 
appreciation  of  the  underlying  principles  governing  the  business. 

Take,  for  instance,  the  advantages  to  the  company  of 
regulation.  I  would  very  much  rather  operate  under  a  low 
rate  and  know  that  that  rate  had  the  endorsement  of  some 
administrative  state  body,  and  know  exactly  where  I  stand, 
than  to  be  harassed  by,  say,  a  board  of  aldermen,  who  are  main- 
ly governed  by  political  considerations,  whereas  an  administra- 
tive board,  when  it  understands  the  business,  if  its  members 
are  honest  men,  gives  us  a  fair  return  on  the  money  we  have  in- 
vested, provided  that  money  has  been  judiciously  spent  and 
provided  that  the  business  is  judiciously  run. 

Stability  of  rates  is  one  advantage  we  get  from  regulation, 
and  regulation  must  necessarily  be  followed  by  protection 
against  competition.  The  great  economic  waste  of  competition 
in  a  business  which  is  naturally  a  monopoly  must  be  brought 
home  by  the  establishment  of  commissions  or  some  other 
form  of  regulation  on  the  part  of  our  various  states  and  as  a 
result  we  are  sure  to  get  protection  for  our  investment  and 
consequently  for  our  securities. 

Probably  I  am  a  little  liberal  on  this  subject  because  my 
boyhood  was  spent  in  a  country  where  rates  of  public  service 
are  regulated  by  the  Board  of  Trade,  where  capital  expendi- 
tures have  to  be  authorized  by  Act  of  Parliament  and  where 
no  public-service  operation  can  be  done  without  legislative 
action  on  the  part  of  Parliament;  and  yet  the  securities  of  the 
properties  so  regulated  stand  very  well  in  the  communities  in 
which  they  are  established. 

What  is  the  advantage  of  regulation  to  the  investor?  After 
all,  you  gentlemen  represent  the  investor.  Regulation  will 
prevent  overcapitalization.  It  will  prevent  a  lot  of  watered 
securities  getting  into  the  hands  of  the  unsuspecting  public  — 
I  do  not  mean  through  the  agency  of  the  members  of  the  In- 
vestment Bankers'  Association  —  but  through  the  agency  of  an 


ELECTRICAL  SECURITIES  443 

entirely  different  class  of  security  dealers.  Protection  against 
competition  must  necessarily  add  to  the  stability  of  the  in- 
vestment. 

If  you  have  steady  rates  based  upon  costs  of  service  and  no 
competition,  and  regulation  of  capitalization,  you  must  of 
necessity  have  permanence  of  investment.  My  main  message 
in  speaking  to  the  investment  bankers  of  this  country  is  to  say 
that  they  and  men  in  positions  like  myself  make  a  very  great 
mistake  in  opposing  the  fair  regulation  of  an  industry  which 
can  only  be  run  as  a  monopoly;  and  no  business  should  be  run 
as  a  monopoly  without  a  fair  oversight  on  the  part  of  the  state. 

[Mr.  Insull  displayed  views  of  generating  stations  of  the 
Commonwealth  Edison  Company  before  concluding.  Some 
of  the  pictures  are  scattered  through  this  book.] 

STABILITY  OF  INVESTMENT 

Before  I  sit  down  I  want  to  talk  a  little  on  the  subject  of 
stability  of  the  investment.  Many  of  you  are  engineers  who 
in  figuring  replacement  values  must  be  fully  aware  of  the  very 
small  amount  of  the  investment  that  is  really  scrapped.  I  do 
not  recall  any  case  where  scrapping  on  the  part  of  first-class 
engineers  has  ever  been  more  than  25  per  cent  of  the  value  of 
the  property;  and  in  my  judgment,  taking  the  average  of  the 
properties  today,  that  is  a  very  large  percentage.  If  you  have 
a  fair  margin  of  investment  to  protect  your  prior-lien  securities, 
the  scrapping  of  a  plant  is  of  little  or  no  consequence  to  you. 
Take  the  buildings  that  I  have  just  shown  you;  they  certainly 
have  a  life  equal  to  a  building  of  the  character  we  are  now  in. 
Take  the  machinery.  Boilers  have  not  changed  much  in  my 
day  except  that  we  get  a  higher  efficiency  out  of  them.  Steam 
piping  is  relatively  the  same.  If  it  is  changed  at  all  it  is  mostly 
a  change  as  a  result  of  bad  engineering  on  the  part  of  the 
operating  company.  Take  labor  and  material.  I  have  not  dis- 
covered myself  that  labor  is  going  down  or  that  the  items 
that  go  into  the  cost  of  building  are  reduced  in  price.  Take 
copper  and  all  the  various  elements  that  go  into  insulation. 


444  ADDRESSES  OF  SAMUEL  INSULL 

The  general  tendency  of  values  is  up  all  the  time,  and  con- 
sequently, from  my  point  of  view,  gentlemen,  you  have  little 
or  nothing  to  fear  from  even  such  drastic  scrapping  as  may 
necessarily  take  place  in  changing  the  electricity  supply  of  a 
series  of  small  communities  to  a  central  system,  operating  over 
a  large  area. 

If  reasonable  protection  is  exercised  in  the  establishment 
of  reserve  funds,  and  if  above  everything  else  the  business  is  so 
run  that  the  relation  with  the  customers,  and  the  relations  with 
the  community,  are  fairly  cordial,  I  do  not  think  you  have  any- 
thing to  fear  in  taking  the  securities  of  the  energy-supplying 
companies,  certainly  not  those  in  the  densely  populated  and 
productive  portion  of  the  United  States. 


CENTRALIZATION  OF  ENERGY  SUPPLY1 

THE  SUBJECT  on  which  it  is  my  privilege  to  address 
you  this  evening  is  one  which,  under  one  title  or  another, 
it  has  been  my  pleasure  to  speak  to  in  this  city  many 
times.  The  business  in  which  I  am  engaged  is  essentially  a 
monopoly  business.  At  the  outset  I  want  it  understood  that 
I  appear,  not  with  any  brief  for  monopoly,  but  to  speak  of  the 
centralization  of  energy  supply  as  necessarily  a  monopoly  on 
purely  economic  grounds.  It  would  be  absurd  for  every  house- 
holder to  have  his  own  water  supply,  his  own  gas-producing 
apparatus,  his  own  method  of  disposition  of  sewage,  a  trans- 
portation system  for  his  own  use,  or  methods  of  communication 
by  wire  purely  for  his  own  use.  These  things  would  be  no 
more  absurd  than  it  would  be  for  the  individual  to  have  his 
own  methods,  his  own  apparatus,  for  his  own  individual  use  for 
the  production  of  electrical  energy. 

The  individual-supply  idea  is  economically  wrong.  There 
is  absolutely  no  good  reason  for  it.  The  economics  of  the  situa- 
tion demand  that  the  supply  of  energy,  whether  it  be  for  use  in 
private  residences,  for  use  in  the  store,  for  use  by  the  manu- 
facturer or  for  use  by  the  transportation  company,  come  from 
one  central  source.  If  the  most  economical  results  are  to  be 
obtained;  if  capital  is  to  be  conserved;  if  labor  is  to  be  conserved; 
if  the  prime  source  of  power,  whether  it  be  the  coal  in  the 
ground,  or  the  waterfall  tumbling  down  the  mountainside, 

1.  An  address  delivered  before  the  Finance  Forum  of  the  Young  Men's 
Christian  Association  in  New  York  on  April  20,  1914.  This  body  established 
a  course  of  lectures  in  relation  to  public  utilities.  It  invited  the  co-operation 
of  men  of  prominence  familiar  with  the  financial,  engineering,  operating  and 
manufacturing  aspects  of  these  utilities.  The  response  was  prompt  and  cordial. 
In  accord  with  the  purpose  of  diffusing  knowledge  on  the  subject,  an  advisory 
committee  of  New  York  business  men  interested  in  utilities  assisted  the  Y.  M. 
C.  A.  in  its  program.  Mr.  Insull's  lecture  was  one  of  this  course. 

445 


446  ADDRESSES  OF  SAMUEL  INSULL 

is  to  be  conserved  —  in  short,  if  we  are  to  get  the  very 
best  possible  results  alike  for  the  user  of  the  energy  in 
low  prices  and  for  the  producer  in  giving  him  a  fair  return 
on  his  capital,  it  is  essential  that  the  business  of  supplying 
that  energy  shall  be  centralized  in  one  large  organization  for  a 
given  area. 

So  convinced  am  I  of  this  fact  —  and  I  hope  that  my  ex- 
amples which  will  be  shown  to  you  this  evening  will  convince 
you  of  the  fact  —  that  it  would  seem  to  me  that  in  these  days 
of  regulation,  in  these  days  of  preaching  of  economic  operation 
of  our  various  public  services,  the  day  will  come  when  some 
of  these  great  regulating  bodies  which  are  so  absolutely  neces- 
sary in  a  business  which  must  naturally  be  a  monopoly  will 
question  the  waste  of  capital,  the  waste  of  fuel,  and  the  waste 
of  effort  that  goes  on  where  the  production  of  energy,  instead 
of  being  centralized,  is  carried  out  on  a  basis  of  separate  supply 
to  separate  classes  of  business  and  separate  classes  of  users. 

THE  BROAD  VIEW  VERSUS  THE  NARROW  VIEW 

One  great  trouble  in  dealing  with  this  subject  is  that  it  is 
usually  viewed  by  those  who  discuss  it  from  the  point  of  their 
own  particular  interests;  I  might  almost  say  from  the  point  of 
view  of  their  prejudice.  They  do  not,  usually,  take  a  broad 
view  of  the  subject;  that  is,  as  to  what  is  best  for  the  whole  com- 
munity; but  they  discuss  it  from  the  point  of  view  of  pride  and 
satisfaction  in  the  manufacture  of  energy  in  the  particular 
generating  station  in  which  they  are  interested.  Those  of  us 
who  take,  as  we  think,  the  broader  view  must  overcome  that 
prejudice,  the  prejudice  of  the  engineer,  the  prejudice  of  great 
captains  of  industry,  who,  however  well  informed  on  the  par- 
ticular line  of  business  to  which  they  have  devoted  their  lives, 
know  little  or  nothing  about  the  economics  governing  the  pro- 
duction and  distribution  of  electric  energy. 

There  is  another  class  of  men  who  discuss  the  subject.  I 
remember  particularly  a  discussion  of  it  within  the  last  few 
months  by  a  distinguished  European  engineer  before  one  of 


CENTRALIZATION  OF  SUPPLY  447 

the  learned  societies  of  Europe.1  This  gentleman  took  up  the 
subject  with  little  or  no  knowledge  of  our  conditions,  unac- 
quainted with  the  character  of  the  service  we  supply,  or  the 
cost  of  that  service,  because  of  the  various  things  demanded 
of  us  here  that  are  not  demanded  in  Europe.  With  little  or  no 
knowledge  of  the  elements  entering  into  our  capitalization 
accounts,  he  came  to  the  conclusion  that  the  only  method  of 
handling  the  class  of  business  about  which  we  are  to  talk  this 
evening  is  the  method  carried  on  in  some  European  cities  in 
which  the  corporations  with  which  he  is  connected  are  mostly 
interested. 

While  I  am  naturally  obliged  to  use  to  a  greater  or  less 
extent  the  figures  compiled  by  the  statisticians  of  the  company 
with  which  I  am  associated  in  Chicago,  I  hope  to  draw  lessons 
from  these  figures  that  will  show  you  that,  on  broad  economic 
grounds,  for  the  best  interests  of  the  community,  whether 
that  community  be  in  a  large  city  or  in  a  small  country  town 
or  village,  or  even  in  a  rural  district,  this  class  of  business  should 
be  run  as  a  monopoly.  As  I  have  stated,  it  should  be  a  regu- 
lated monopoly,  for  no  public  service,  privately  owned,  and 
operated  as  a  monopoly,  should  be  unregulated.  It  should  be 
conducted  on  the  basis  of  one  system  of  distribution  and  one 
central  source  of  production.  If  this  course  is  followed  all 
through,  the  best  results  will  be  obtained  for  all,  the  greatest 
possible  conservation  of  our  natural  products  will  be  achieved, 
with  a  much  reduced  price  for  the  product  charged  to  the 
consumer,  while  the  greatest  possible  profit,  within  reasonable 
limits,  will  be  the  reward  of  those  who  have  the  courage  to 
put  their  money  into  the  enterprise. 

DIVERSITY  OF  DEMAND 

Fig.  1  shows  the  diversity  of  demand.     The  fundamental 

1.  This  refers  to  the  paper  on  "Electricity  Supply  in  Large  Cities," 
presented  by  Professor  G.  Klingenberg,  Ph.D.,  before  the  Institution  of  Elec- 
trical Engineers  in  London  on  December  4,  1913.  Professor  Klingenberg  con- 
sidered the  conditions  of  electricity  supply  in  London,  Berlin  and  Chicago,  and 
then  went  into  a  discussion  of  the  factors,  or  supposed  factors,  entering  into 
the  cost  of  electrical  energy  in  the  cities  named. 


448 


ADDRESSES  OF  SAMUEL  INSULL 


basis  of  profit  making  in  public-service  business  is  the  diversity 
of  demands.  That  is  the  difference  between  one  human  being 
and  another,  the  desire  of  one  human  being  to  do  one  thing,  and 
the  desire  of  another  human  being  to  do  something  else,  at  the 
same  time.  I  have  used  this  particular  chart  a  number  of 
times,  and  so  have  a  number  of  my  assistants,  to  demonstrate 
this  phase  of  the  subject.  The  diagram  represents  a  block  of 


WINTHROP  AVE. 


193 


Number  of  apartment  customers 

Number  of  hall-lighting  and  garage  customers 

Average  number  of  lamps  per  customer 12 

Kilowatt-hours  used  per  year 49,620 

Customers  separate  maxima 92  kw.  =6.3%  load  factor 

Maximum  at  transformers 29  kw.  =   20%  load  factor 

Annual  income  per  customer $18 . 34 

Diversity  factor 3.2 

Fig.  1.     Electric  Service  for  a  Block  of  Apartment  Buildings,  Chicago, 
Illustrating  Diversity  of  Demand 

relatively  small  apartments  in  the  northern  part  of  Chicago, 
193  apartments  in  all,  and  there  are  227  meters  in  the  block, 
being  used  by  193  apartment  customers  and  34  hall-lighting 
and  garage  customers.  If  you  take  each  customer  by  himself, 
that  is,  each  apartment  by  itself,  the  use  of  energy  in  each 
separate  apartment  is  so  slight  that  the  investment  to  take  care 
of  that  particular  customer,  if  you  trace  it  back  to  the  generating 
station  where  the  power  is  produced,  would  not  be  used  on  an 
average  more  than  between  six  per  cent  and  seven  per  cent 
of  the  time.  But  so  varied  are  the  ideas  of  human  beings,  and 
they  so  seldom  do  the  same  thing  at  exactly  the  same  moment, 
that,  if  you  take  the  whole  193  apartments  together,  and  then 


CENTRALIZATION  OF  SUPPLY  449 

find  out  how  much  energy  as  a  whole  they  use  at  one  particular 
moment,  the  fact  is  developed  that  the  diversity  of  their  de- 
mand is  so  great  that  instead  of  using  your  investment  only 
between  six  and  seven  per  cent  of  the  time,  they  use  your  in- 
vestment, when  taken  as  a  whole,  twenty  per  cent  of  the  time. 

If  you  will  look  around  that  neighborhood  a  little  farther, 
you  will  find  a  number  of  local  stores,  motion-picture  shows, 
and  all  the  various  types  of  small  business  establishments  that 
go  to  make  up  a  local  community.  When  you  add  that  busi- 
ness to  the  business  of  the  apartments  in  the  block,  you  find 
that  you  have  increased  the  average  demand  on  your  invest- 
ment in  that  particular  neighborhood  to  such  an  extent  that 
your  investment  is  used  thirty  per  cent  of  the  time. 

When  you  trace  this  load  to  the  power  station,  you  find  that 
such  is  the  combination  of  demands  from  several  classes  of 
business  that  these  people  in  the  residence  territory  call  on  you 
for  the  greatest  amount  of  energy  not  when  you  require  that 
energy  to  operate  the  office  buildings  and  the  elevators  in  these 
buildings,  and  the  transportation  system,  and  the  stores  and 
the  workshops,  but  about  two  hours  after  all  that  work  is 
practically  closed  down. 

The  whole  question  of  the  economics  of  the  business  of  elec- 
trical energy  supply  is  really  summed  up  in  the  few  remarks  I 
have  made  on  that  particular  chart,  and  the  information  which 
is  given  on  the  chart.  The  question  of  profit  and  loss,  of  the 
possibility  of  selling  at  one  price  or  another,  is  all  involved  in 
that.  It  is  a  question  of  the  diversity  of  the  demand  affecting 
the  average  use  of  your  investment. 

Fig.  2  gives  similar  information  regarding  an  entirely  dif- 
ferent class  of  business,  and  it  shows  precisely  the  same  thing. 
It  has  been  only  in  the  last  year  or  so  that  it  was  possible  to 
register  the  exact  time  at  which  a  given  consumption  of  energy 
takes  place.  We  have  tried  in  this  particular  chart  to  give 
you  information  as  to  the  diversity  of  very  large  light-and-power 
customers  as  distinguished  from  very  small  light  customers  as 
shown  in  the  previous  chart. 

The  Chicago  company  of  which  I  have  the  privilege  of  being 


450 


ADDRESSES  OF  SAMUEL  INSULL 


the  head  was  the  pioneer  in  installing  in  the  early  days  a 
demand-recording  meter  called  the  Wright  demand  meter,  and 
in  working  out,  from  a  very  large  number  of  these  customers, 
a  tabulation  on  the  relation  of  the  maximum  to  the  connected 
load  for  customers  of  various  sizes  and  various  classes.  Those 
actual  statistics  have  been  used  by  many  companies  and  or- 
ganizations throughout  this  country  in  their  rate-making 
schemes,  which  are  based  largely  on  the  percentage  of  the  con- 
nected load.  The  information  given  in  Fig.  2  is  the  result  of 


Fig.  2.     Diversity  of  Requirements  of  Large  Customers 

exactly  the  same  policy  applied  to  our  large  or  wholesale  cus- 
tomers. We  have  been  installing,  as  fast  as  practicable, 
metering  devices  which  furnish  us  the  tape  record  of  the  half- 
hour  readings  of  the  wattmeter  of  each  of  our  large  customers, 
and  the  tabulation  shown  on  this  chart  is  the  result  of  a  study 
of  82  such  customers.  From  this  tape  record  we  are  able 
to  plot  the  24-hour  load  diagrams  and  get  the  highest  maxi- 
mum for  the  year  and  also  the  load  at  the  time  of  the  total 
coincident  maximum  for  the  entire  system,  and  thus  arrive  at 
the  diversity. 

I  believe  this  is  about  the  first  information  of  this  character 
that  has  been  published.  It  is  the  first  I  have  seen  myself, 
and  to  those  of  you  who  are  familiar  with  the  business  the 
mere  showing  of  the  chart  explains  itself,  but  for  the  benefit 


CENTRALIZATION  OF  SUPPLY 


451 


of  those  who  are  not  familiar  with  the  subject  I  will  give  some 
detailed  explanation. 

Referring  to  the  chart  (Fig.  2),  the  highest  rectangle  in  the 
center  of  the  chart  represents  the  total  amount  of  energy  called 
for  by  the  82  customers  that  are  represented  in  these  smaller 
blocks  shown  around  the  large  block.  The  maximum  load 
on  our  system  came  on  the  6th  day  of  January,1  and  the  demand 
on  us  for  energy,  as  I  will  show  partly  from  this  chart  and 
partly  from  subsequent  charts,  was  so  diversified  that  notwith- 


DEPARTMENT  STORES 

wuo 
800 

INCOME   PER  CUSTOMER  $35,'aOO 
INCOME   PER  KILOWATT   HOUR  _l.72£ 

AMOU 

,K.W. 

jj-TT-, 

^P-1 

r-i_r»- 

"S 

400 
200 
i 

| 

pi 

L 

1 

° 

i 

'-TO 
0 

M* 

r 

TYPIC* 

L  MAX 

MUM   L 

3AO   0 

AQRAh 

f 

I 

O-J—1 

LU_ 

7 

, 

—  L 

M.       2         46         8        10      12  N.       2         4          6        8        JO     12 

Fig.  3 

standing  it  would  have  taken  26,640  kilowatts,  or,  roughly 
speaking,  between  30,000  and  35,000  horse-power,  to  take  care 
of  the  maximum  demand  of  each  one  of  these  customers  sepa- 
rately, on  the  day  when  the  greatest  demand  came  on  us  from 
all  sources,  it  took  only  9,770  kilowatts  for  these  same  customers. 
The  difference  between  26,640  kilowatts  and  9,770  kilowatts 
represents  what  I  have  tried  to  explain  to  you  as  the  diversity 
factor  in  our  business. 

That  variation  of  demand,  or  diversity,  comes  about  from  a 
great  variety  of  reasons.  For  example,  the  brick-yards  and 
quarries,  represented  in  the  upper  part  of  the  diagram,  do  not 

1.  Speaking  of  the  winter  of  1913-1914. 


452  ADDRESSES  OF  SAMUEL  INSULL 

run  in  the  winter  time,  as  the  frost  interferes  with  their  business. 
The  department  stores  represented  by  the  block  in  the  upper 
left-hand  corner  are  particularly  busy  just  before  and  just 
after  Christmas,  so  that  their  demand  is  very  high  at  that 
time.  Referring  to  the  block  representing  manufacturers, 
the  workman  cannot  run  a  tool  in  a  workshop  —  assuming 
the  workshop  is  meant  for  light  manufacturing  purposes  and 
located  in  a  high  building  —  he  is  unable  to  run  a  tool  in  the 
shop,  go  down  in  the  elevator  which  takes  him  to  the  street, 


j-  L 

Lr  —  r 

f 

NUMBE 

PL 

a  OF  c 

BLIC  ( 

3TOME 

3ARAGE 

s 

...IT 

V* 

r 

t 

MAX°IM 

E   PER    K 

-T 

I 

ANNU 

LLOAD 

FACTO 

*  

.4% 

E 

§ 

] 

| 

t 

TVF 

ICAL  M 

(VXIMU 

*   LOAD 

OIAOR 

M 

\ 

c 

] 

r1- 

j-u- 

S. 

J"1— 

12  M.       ' 

4 

i 

i 

1 

0      12 

Fig 

M.           2 

.4 

4 

6 

i 

\ 

a  12  N 

travel  on  a  street  car,  and  use  electric  light  in  his  home  all  at 
the  same  time.  The  maximum  demand  on  the  6th  of  January 
came  from  all  of  these  various  sources,  and  you  see  that  the 
manufacturer  naturally  shuts  down  before  someone  else  is 
using  the  energy.  Ice  manufacturers  do  a  relatively  small 
business  in  zero  weather.  Therefore  their  demand  is  very  light 
in  the  middle  of  winter.  In  the  case  of  such  heavy  users  of 
energy  as  cement  works  we  make  a  special  arrangement  which 
provides  that  they  shall  shut  off  their  demand  at  the  period  of 
our  maximum  load.  In  the  case  of  steel,  iron  and  brass  works, 
their  demand  occurs  before  the  period  of  maximum  load  on  a 


CENTRALIZATION  OF  SUPPLY  453 

dark  winter  day,  and  so  on  with  the  other  classes  of  business 
shown  in  the  chart.  The  result  is  that  the  diversity  is  so  great 
that  what  cannot  be  produced  economically  separately  can 
be  produced  economically  as  a  whole. 

I  am  going  to  show  you  now  in  detail  the  various  charts 
which  represent  the  various  businesses  shown  on  the  previous 
diagram.  Fig.  3  represents  the  main  department  stores  of 
Chicago.  There  are  seven  customers,  seven  department  stores, 
the  total  annual  income  from  which  is  $250,700,  the  average 


12*       2         4         6         8        10     12  N.       2         4         6         8        10     12  M. 


Fig.  5 

income  per  customer  being  $35,800  per  year.  The  income  per 
kilowatt-hour,  on  account  of  the  extraordinary  character  of 
the  load  and  the  large  amount  of  energy  bought,  is  1.72  cents. 
The  maximum  kilowatts  for  the  year  amounts  to  5,280.  The 
load  at  the  time  of  the  maximum  load  on  our  system,  January 
6th,  was  4,400  kilowatts,  and  the  amount  of  diversity  was  880 
kilowatts.  The  annual  load  factor,  that  is,  the  average  use 
of  our  investment  for  the  separate  customers,  is  31.8  per  cent. 
There  are  130.8  acres  of  floor  area  in  these  department  stores, 
and  it  cost  about  4.4  cents  per  square  foot  per  year  for  light 
and  power. 


454 


ADDRESSES  OF  SAMUEL  INSULL 


Some  17  public  garages  contribute  information  to  the 
diagram  of  Fig.  4.  You  will  notice  the  income  per  kilowatt- 
hour  is  2.23  cents.  The  maximum  load  in  kilowatts  for  the 
year  is  2,220,  and  at  the  time  of  our  maximum  load,  on  Jan- 
uary 6th,  it  was  only  90  kilowatts.  These  contracts  are  taken 
on  the  basis  of  our  limited-hour  or  off-peak  power  rate,  con- 
taining a  provision  that  they  shall  shut  off  their  service  at 
the  time  of  our  maximum  load.  The  amount  of  diversity  in- 
volved in  this  service  is  very  large,  being  2,130  kilowatts,  and 


TV 

~. 

AXIML 

M   LOAI 

DIAQI 

•>M 

"11 

-i__r 

Ir 

I 

H 

I 

ISTEEL.  IRON  AND  BRASS  WORKS 

NUMBER  OP   CUSTOMERS  15 
TOTAL  ANNUAL    INCOME  —-4172,670 

MAXIMUM  K.W.  FOR    YEAR     ...»!60 
LOAD  IN  K.W.S.  SOP.M.  JAN.  «  9BO 

ANNUAL    LOAD    FACTOR  »».««/ 

I- 

^ 

I 

1 

-I* 

J 

n 

-\ 

Fig.  6 

the  annual  load  factor  is  very  low,  being  20.4  per  cent,  but  the 
business  is  very  desirable  because  the  demand  for  it  comes  at 
other  than  the  times  when  our  investment  is  needed  to  the 
greatest  extent  by  the  greater  number  of  our  customers.  It  is 
of  interest  to  note  that  in  the  17  garages  mentioned  there  are 
854  electric  vehicles  charged,  at  a  cost  per  vehicle  of  $109  per 
year,  or  say  somewhere  about  30  cents  a  day  for  "feeding 
the  horses,"  so  to  speak. 

The  ordinary  office-building  curve  of  Fig.  5  is  not  unlike 
a  department-store  curve.  The  especially  interesting  facts 
regarding  office  buildings  are  the  load  diagram,  load  factor 
and  the  diversity  factor.  Office  buildings  have  always  been 


CENTRALIZATION  OP  SUPPLY 


455 


considered  the  least  desirable  class  of  business  which  it  was 
possible  for  the  central-station  company  to  serve.  This 
diagram  and  many  others  which  we  have  studied  show  that 
at  least  a  considerable  portion  of  office-building  business  is 
about  as  desirable  as  most  other  classes  of  business,  as  the 
yearly  load  factor  is  very  good,  being  31.6  per  cent.  The  reason 
for  this,  of  course,  is  the  all-day  lighting  on  the  lower  floors 
and  halls,  and  the  elevator  and  other  motor  service. 

The  office  buildings  included  in  this  inquiry  have  a  floor 


, 

« 

L 

XIMUW 

LOAD 

DlAQf 

UN 

j 

\ 

r1- 

In- 

-fc-H. 

J 

• 

MA 

NU 

FA 

CTURE 

RS 

X 

1 

TOTAL 
INCOM 
INCOM 

e   P 

E    P 

;: 

L  INCO 
CUSfO 

ME  

•  —  * 

1 

MX) 

»MOU» 

" 

„. 

)  FACTC 

"— 

— 

..,,. 

1 

r 

1 

T-T 

-l_r^ 

_T" 

r 

— 

-"1 

-*vr 

0 

12  M-    2         4       6  *-M.     8        10     12  N.      2         4       6f.H.     8        10      12> 

Fig.  7 

area  of  717,000  square  feet  and  the  cost  of  electricity  for  all 
purposes  amount  to  5.2  cents  per  square  foot  per  year. 

Fig.  6  represents  steel,  iron  and  brass  works.  If  I  had 
been  asked,  before  we  had  the  necessary  instruments  to  indi- 
cate not  only  the  amount  of  energy  consumed  but  also  the  time 
at  which  it  is  consumed,  whether  that  class  of  business  was 
very  desirable,  because  of  its  diversity,  notwithstanding  its 
low  load  factor,  I  think  my  inclination  would  have  been  to 
state  that  I  very  much  doubted  whether  there  was  a  large 
diversity.  You  will  see,  however,  that  the  amount  of  diversity 
is  2,300  kilowatts,  and  the  annual  load  factor  is  29.6  per  cent. 
I  had  the  impression  that  such  manufacturing  establishments 


456 


ADDRESSES  OF  SAMUEL  INSULL 


s 

NUMB 
TOTAL 
INCOH 
INCON 

LOAD 

ANNU 

POCK  YARDS  AND  PACKING 

ER    OF   CUSTOMERS.-.  —2 
ANNUAL   INCOME  S68,2OO 
E    PER    CUSTOMER  S33.  IOO 
E    PER    KILOWATT   HOUR  .._  1.24 
UM  K.W.  FOR    YEAR          1600  K.W. 

fl 

1.200 
1.000 
800 
600 
400 
200 

0 

M 

1,000 
800 
600 
400 

<n 

>IT  OF   DIVERS 
kL    LOAD   FACT 

TY  72C 

°Y 

1  n 

J  L 

j 

l-l 

j 

J  — 

-"T 

r^ 

i 



-T-L 

1 

J 

I 

k 

L 

J 

TYPIC 

J 

LOAD 

DIAQR 

M 

° 

2w     2         4         6          8        10         12        2          46          8         10      12 

Fig.  8 

CENTRALIZATION  OF  SUPPLY 


457 


probably  demanded  the  greatest  amount  of  energy  from  us  at 
the  same  time  that  everybody  else  was  demanding  the  greatest 
amount  of  energy.  The  contrary  is  the  case.  It  simply 
shows  to  me  —  I  do  not  know  how  it  appears  to  the  engineers 
who  may  be  present  —  the  extreme  necessity  of  knowing  all 
you  possibly  can  about  your  own  line  of  business.  The  diver- 
sity in  that  case  is  very  great;  it  has  a  relation  of  3,280  kilowatts 
to  980  kilowatts,  and  notwithstanding  the  low  load  factor,  the 
value  of  it  from  every  point  of  view  is  very  great. 


"1 

TYP 

J-LJ- 

AXIMUI 
-1 

'     L°*' 

O.AO 

,AM 

*T_T 

Jl_r 

Ll- 

LrX 

JL_ 

f 

0) 

ICE  MANUFACTURERS 

< 

I 

INCOME    PER    CUSTOMER  »!6,300 
INCOME    PER  KILOWATT  HOUR  1.0'* 

2  M.     2          4        6  A.M.    8         10       12  N.      2          4       6  P.M.     8         10        12 

Fig.  10 

A  number  of  different  classes  of  manufacturers  are  grouped, 
as  to  electric  service,  in  Fig.  7.  They  are  very  much  on  the 
same  general  order  as  the  steel,  iron  and  brass  works,  and  show 
a  very  decided  diversity. 

Fig.  8,  relating  to  the  stockyards  and  packing  industries 
in  Chicago,  shows  an  entirely  different  class  of  business,  but 
it  displays  good  diversity  and  an  extremely  good  load  factor. 

Electrical  energy  supplied  to  five  telephone  exchanges 
and  offices  is  represented  in  Fig.  9.  The  cost  of  electricity 
per  telephone  customer  or  telephone  connected  amounts  to 
about  28  cents  per  annum. 

The  load  diagram  of  ice  manufacturers  is  shown  in  Fig.  10. 


458  ADDRESSES  OF  SAMUEL  INSULL 


HJ 

r 

-"1- 

^j- 

F 

ft 

.r1 

kJ 

rvpiCA 

.   MAX! 

1UM    L 

AoJoRAM 

•h_, 

1 

J 

HOTELS 

NUMBER  OF  CUSTOMERS  *.  2 

- 

-f 

f 

r 

| 

AMOUNT  OF    0,VERS,TV  .. 

1 

J 

L 

rJ 

6         8        10     12  H.        2         4         6         8        10    12". 

Fig.  11 


200 
If* 
100 
GO 

9 

TYPlC/i 

« 

MUM 

-L, 

f 

Tj 

LOAC 

DIAGt 

AMS 

JU 

I 

F 

r 

L 

J 

r 

HHUM 

ICK  Y 

BER  OF 
}ME  PE 

XROS  A 

CUSTO 
AL    INC 
CUSTO 

ND  QUARRIES 

J5 

3ME  »21 
MER  »7 

20 

LOAD  FOR  > 
AMOUNT   0 

DIVER 
AO  FAC 

-_-_-:,-< 

, 

; 

TOR  

BH'CK 

YARD! 

[ 

12  M,    .2         -1          6         8         10      12  N.       2          4         6         8         10    12M. 

Fig.  12 


CENTRALIZATION  OF  SUPPLY  459 

The  demand  here  is  very  satisfactory  indeed,  except  that  it  is 
extremely  low  in  the  winter  time.  It  practically  goes  off  in  the 
cold  weather.  The  load  factor  is  very  high.  The  average 
annual  load  factor  is  56.2  per  cent,  and  at  the  time  when  the 
maximum  demand  is  made  on  us  for  energy  —  the  time  when 
our  plant  is  taxed  to  the  utmost  —  the  amount  of  energy  used 
in  ice  manufacturing  is  only  one  per  cent  of  the  maximum  de- 
mand for  the  year  in  this  class  of  business. 

The  same  class  of  information  with  relation  to  hotels  is 


4.'»JO 

300o 
2UOO 

n 

TYP 

CALM 

UCIMIM 

1    LOAl 

DIAQ 

1AM 

.UJU 
4UCO 

nuoo 

'.COO 
1IJUO 

0 

r0- 

U 

—  i 

nl 

Ln_ 

JL 

D, 

IF 

nJ 

"l— 

JL 

in 

u 

[ 

t 

U 

L 

| 

CEMENT  W 
MISCELL 

NUMBER   OF   CUSTOMER 

ORKS  AND 
ANEOUS 

£ 

1 

1 

..       »293,900 

MAXIMUM   K.W.  FOR    YE»H  6030 

AMOUNT  OF    DIVERSITY    .5490 
ANNUAL  LOAD    FACTOR,  72% 

5 

M.    2         4        6«.M.    8         10      12x.     2          4        GP.M.    8        10    12k 

Fig.  13 

shown  in  Fig.  11.  The  load  factor  is  very  good,  but  the  diver- 
sity is  relatively  poor  as  compared  with  some  of  the  other 
businesses. 

Energy  consumption  by  brick-yards  and  quarries  is  shown 
in  Fig  12.  As  I  stated  before,  these  industries  are  discontinued 
in  the  winter  time. 

Another  class  of  business,  cement  works,  as  well  as  miscel- 
laneous operations  which  use  a  large  amount  of  energy,  present 
the  load  diagram  of  Fig.  13.  Here  there  is  great  diversity 
between  the  maximum  demand  of  the  load  of  this  class  of 
business  and  the  demand  at  the  period  of  our  maximum  load 
of  our  entire  business. 


460 


ADDRESSES  OF  SAMUEL  INSULL 


Table  I  gives  the  summation  of  the  figures  given  in  Figs. 
3  to  13  inclusive.  It  is  a  good  indication  of  the  average  power 
business  in  any  large  city.  But,  as  I  have  stated,  there  are 

TABLE  I.— SUMMARY  OF  LARGE  LIGHT-AND-POWER  CUSTOMERS 
WITH  PRINTING-TAPE  WATTMETERS 


No. 
of 
cus- 
tomers 

Kind  of  business 

Annual  income 

Maximum  kw. 

Di- 
versity 

Load 
factor 

Amount 

Per 
Kw.-hr. 

For 
year 

5:00 
p.m. 
Jan.  6 

7 
17 
4 
15 

14 
2 
5 

7 
2 
3 
6 

82 

Department  Stores  

$250,700 
93,400 
59,700 

172,600 
159,000 
66,200 

34,500 
114.300 
27,400 
21,600 

293,900 

1.72c 
2.23c 
2.24c 

2.02c 
2.05c 
1.24c 

2.23c 
1.07c 
1.67c 
1.91c 

0.77c 

5,280 
2,220 
960 

3,280 
3,680 
1,550 

480 
2.170 
340 
650 

6,030 

4,400 
90 
720 

980 
1,550 
830 

380 
20 
260 

540 

880 
2,130 
240 

2,300 
2,130 
720 

100 
2,150 
80 
650 

5.490 

31.8% 
20.4% 
31.6% 

29.6% 
24.0% 
39.2% 

35.6% 

56.2% 
55.0% 
20.0% 

72.0% 

Office  Buildings  
Steel,     Iron     and     Brass 
Works 

Manufacturers  

Stockyards  and  Packing 
Telephone  Exchange  and 
Offices  
Ice  Manufacturers  
Hotels  
Brick-Yards  and  Quarries 
Cement  Works  and  Mis- 
cellaneous   

$1,293,300 

1.35c 

26,640 

9,770 

16,870 

41.2% 

: 

Diversity  Factor  

2.7 
.  .  .96,077,500 

^otal  Kw.-hr.  sold  

only  82  customers  included  in  this  and  the  previous  charts  on 
that  subject.  We  have  about  428  other  large  customers,  who 
give  us  about  $1,500,000  of  income  a  year,  so  that  the  power 
business  of  that  character  yields  us  somewhere  between  $2,500,- 
000  and  $3,000,000. 

We  are  applying  the  same  method  of  measuring,  as  rapidly 
as  possible,  to  all  our  large  power  customers.  Eventually 
we  hope  to  have  elaborate  tabulations  which  will  show  us  the 
advantage  of  one  class  of  business  as  against  another,  with  the 
relation  of  the  prices  charged  to  earning  capacity  from  our 
point  of  view  of  each  separate  kind  of  business. 

TABLE  II.— ANNUAL  INCOME    FROM  SALE  OF  ELECTRICITY 

Per  capita       Per  Kw.-hr. 

Baltimore $4.22  2.72c 

Philadelphia. 4.65  3.67o 

New  York  and  Brooklyn 6.37  4.45c 

San  Francisco  and  Vicinity 6  40  1  97o 

Boston  (City  and  Suburbs) 6  48  5  37o 

Chicago 7.18  2.05o 

Table  II  shows  two  interesting  features  in  connection 
with  the  production  and  distribution  of  large  amounts  of 


CENTRALIZATION  OF  SUPPLY 


461 


energy.  These  are  the  sales  per  capita  and  the  price  per  kilo- 
watt-hour. There  is  some  question  as  to  the  extent  to  which 
per  capita  figures  are  any  real  guide  to  conditions,  but  the  fact 
is  that  it  is  almost  the  invariable  rule  that  where  you  have  a  low 
price  per  kilowatt-hour  you  have  a  high  income  per  capita. 
Boston,  with  its  high  income  per  capita,  is  an  exception,  as  is 


-J> 


EW   YO 

ADELPt 


PER    K.W  H.    DECREASES 


•   BROOKLY 


Fig.  14.     Relation  of  Income  to  Output 

also  Baltimore  with  a  low  income  per  capita  owing  to  its  large 
colored  population.  I  happen  to  have  the  figures  as  regards 
gas  consumption  (Table  III),  and  it  is  rather  interesting  to  find 
that,  although  the  electrical  business  is  a  comparatively  new 

TABLE  III— ANNUAL  INCOME  FROM  SALE  OF  GAS 
(Exclusive  of  Street  Lighting) 

Per  capita 

Baltimore $6 . 17 

Philadelphia 6.21 

Brooklyn 6.31 

Chicago 7.13 

one,  we  have  in  Chicago  already  managed  to  pass  the  sales  per 
capita  of  our  friends  in  the  gas  business.  The  income  from  the 
sales  of  gas  per  capita  is  $7.13,  and  the  income  from  the  sales 
of  electricity  per  capita  is  $7.18. 

Fig.  14  shows  that  as  the  output  per  capita  increases,  the 
load  factor  improves  and  the  income  (and  cost)  per  kilowatt- 


462 


ADDRESSES  OF  SAMUEL  INSULL 


hour  decrease.  For  instance,  the  income  per  kilowatt  is  very 
high  in  London,  England,  the  output  per  capita  is  very  low,  and 
the  load  factor  is  relatively  poor.  If  I  had  on  this  chart  a 
cross  curve  which  would  follow  practically  the  line  of  income 
per  kilowatt-hour,  that  is,  figuring  cost  as  the  total  of  labor- 
and-material  cost,  interest  and  depreciation,  you  would  see 


A3    THE  OUTPUT  PE 
APITA  INCREASES,  THE 
LOAD  FACTOR  IMPR 


RETURNS  I  BY  ST 


8<f 


0         5         101520253035 

ANNUAL  CAPACITY  LOAD  FACTORS  (RATIO  OF 


40        45        50        55 

RAGE    LOAD   TO    CAPACITY) 


Fig.  15.    Relation  of  Income  to  Output  as  Shown  by 
Census  Returns 

that  the  rule  is  almost  invariable  that  as  the  income  per  kilo- 
watt-hour goes  down,  as  the  output  per  capita  goes  up,  the 
cost  per  kilowatt-hour  follows  the  line  of  income  and  the  load 
factor  necessarily  shows  a  very  decided  improvement. 

STATISTICS  OF  OUTPUT  AND  INCOME 

It  is  interesting  to  note  in  this  chart  that  the  highest  output 
per  capita  is  at  Niagara  Falls,  and  the  lowest  income  per 
kilowatt-hour  is  also  at  Niagara  Falls.  San  Francisco,  Min- 
neapolis, and  Baltimore  are  all  in  the  area  of  hydro-electric 
production,  which  is  supposed  to  be  very  much  cheaper  than 
production  from  coal.  Chicago,  with  steam  production,  is 
pretty  close  to  the  hydro-electric  production,  both  as  to  low- 


CENTRALIZATION  OF  SUPPLY 


463 


ness  in  income,  high  point  of  output  per  capita,  and  first-class 
load  factor,  the  last  figure  being  43  per  cent  last  year. 

For  some  time  we  questioned  the  reliability  of  these  figures 
and  of  the  law  that  we  thought  was  shown  by  them,  and  so  we 
looked  up  the  Census  figures  of  the  United  States  Government. 
The  Census  figures  are  given  for  whole  states  only  and,  plotted, 
they  show  as  in  Fig.  15.  As  there  was  not  room  to  print  the 
names  of  all  the  states  on  the  diagram,  a  tabulation  of  all  the 
states  is  given  in  Table  IV.  As  the  maximum  demand  of  the 

TABLE  IV.— CENSUS  RETURNS  BY  STATES 


Name  of  state 


Plant  rating 
load 
factor 


Output 
per  capita 
m  Kw.-hr. 


Income 

per  Kw.-hr. 

in  cents 


Alabama 22.7 

Arizona 25 . 4 

Arkansas 12.4 

California 33.9 

Colorado 25 . 3 

Connecticut 19.2 

Florida 12.5 

Georgia 17.8 

Idaho 37.0 

Illinois 29.3 

Indiana 19.9 

Iowa 14.4 

Kansas 22.0 

Kentucky 15.9 

Louisiana 10 .9 

Maine 22.7 

Maryland 5.0 

Massachusetts 17.5 

Michigan 23.2 

Minnesota 22.7 

Mississippi 14.6 

Missouri 21 .7 

Montana 58 . 0 

Nebraska 18.6 

Nevada 48.6 

New  Hampshire 25 .0 

New  Jersey 24.4 

New  Mexico 12.9 

New  York 32 . 1 

North  Carolina 18.7 

North  Dakota 12 .9 

Ohio 18.6 

Oklahoma 19.7 

Oregon 20.7 

Pennsylvania ....  15.7 

Rhode  Island ....  18.4 

South  Carolina 30.7 

South  Dakota 14.0 

Tennessee 17-4 

Texas                                        .              ....  27.6 

Utah 26.0 

Vermont 21.9 

Virginia 8.1 

Washington 14.2 

West  Virginia 16. 1 

Wisconsin 24.9 

Wyoming 16.1 


22 

161 

11 

734 

206 

117 

34 

33 

355 

205 

88 

32 

79 

33 

11 

158 

21 

115 

187 

90 

16 

71 

1015 

47 

550 

293 

151 

28 

239 

32 

21 

84 

29 

87 

77 

115 

235 

42 

35 

52 

232 

159 

14 

62 

35 

92 

79 


2.49 
3.56 
5.45 
1.59 

4ilO 
5.11 
2.01 
1.37 
2.52 
3.26 
6.45 
2.19 
3.64 
12.25 
1.74 
1.37 
4.17 
2.19 
3.72 
4.02 
4.18 
1.05 
4.98 
1.38 
1.84 
2.85 
5.50 
2.63 
1.90 
7.01 
2.99 
4.54 
2.39 
4.14 
3.71 
1.24 
4.58 
3.24 
3.38 
1.75 
2.07 
2.65 
4.33 
2.60 
2.92 


464  ADDRESSES  OF  SAMUEL  INSULL 

various  plants  is  not  given  in  the  Census  figures,  we  had  to  base 
the  load  factors  on  the  plant  rating  instead  of  the  maximum 
demand,  but  you  will  find  that,  relatively,  the  same  rule  follows 
as  was  shown  in  the  case  of  the  cities.  The  income  per  kilowatt- 
hour  goes  down  pretty  steadily,  the  output  per  capita  goes  up 
pretty  steadily,  the  load  factor  improves  as  selling  price  is 
lowered,  and  the  output  per  capita  goes  up  as  the  selling  price 
is  lowered. 

I  think  that  Fig.  15  and  the  table  are  among  the  most 
interesting  which  we  can  produce  on  this  subject  of  the  central- 
ization of  energy  supply.  They  show  that  all  the  great  water- 
power  states  of  the  West  are  in  the  category  of  low  income  per 
kilowatt-hour,  high  output  per  capita,  and  extremely  high 
load  factor.  It  is  extremely  interesting  to  me  to  note  that  in 
a  coal  state  like  Illinois,  where  we  have  little  water-power 
in  proportion  to  the  energy  consumed,  we  are  located  on  this 
chart  right  among  the  water-power  states.  New  York  is 
naturally  in  that  group,  because  it  is  brought  there  by  the 
extraordinary  conditions  at  Niagara  Falls. 

I  think  that  Fig.  15  is  an  absolute  demonstration  of  the 
necessity  of  monopoly  in  the  production  and  distribution  of 
energy.  Those  of  you  who  are  familiar  with  the  business  will 
recall  the  situation  in  tbe  great  water-power  states.  You  will 
remember  that  in  order  to  utilize  the  water-powers  that  have 
so  far  been  brought  into  use  it  has  been  necessary  in  most  cases 
to  make  installations  of  great  size  and  requiring  large  sums  of 
money  to  defray  the  cost.  The  territory  is  sparsely  settled; 
the  industries  are  relatively  few;  and  the  engineers  engaged  in 
marketing  the  product  of  those  expensive  water-power  plants 
have  to  take  every  class  of  business  within  their  reach.  No  one 
within  the  area  of  a  water-power  on  the  Pacific  slope  of  the 
Sierra  Nevadas  or  upon  the  eastern  slope  of  the  Rocky  Moun- 
tains would  think  of  producing  his  own  power  if  a  transmission 
line  of  a  water-power  company  was  anywhere  within  reach, 
partly  owing  to  the  high  price  of  fuel  in  some  of  the  territory, 
and  partly  to  the  low  price  quoted  for  energy  by  the  majority 
of  the  large  hydro-electric  producing  companies.  The  fact 


CENTRALIZATION  OF  SUPPLY  465 

is  that,  whether  it  is  to  operate  the  copper  mines  of  Montana, 
or  to  drive  the  trains  to  cross  the  mountains  farther  west  to- 
ward the  Pacific  Coast,  the  consumers,  instead  of  having  their 
own  individual  plants,  go  in  most  cases  to  the  hydro-electric 
companies. 

WHAT  HAS  BEEN  DONE  IN  THE  WEST  CAN  BE  DONE 
IN  THE  EAST 

That  condition  has  gone  on  throughout  the  western  water- 
power  states  for  a  number  of  years,  simply  as  a  matter  of  neces- 


— 

RATIO  OF  *>OWER  TO 
TOTAL  KILOWATT  HOURS 

90  K 

70% 

rn"' 

ct 

ICAGO 

8ER 

«_ 

=^ 

MINNEAPOLIS 



M'/i 
0* 
30% 

0(1  y 

^___ 



LOND 

>N  1 

_T 

_l 

^J— 

10% 

190*  1906  1906  1907  1908  1909  1910  1911  1912   1913 

YEARS 

Fig.  16.     Diagram  Showing  Proportion  of  Motor  Load  to 
Total  load 

sity.  The  hydro-electric  companies  needed  the  income,  and 
they  quoted  tariffs  that  would  get  the  business.  As  a  result, 
in  most  of  the  territories  where  hydro-electric  plants  are  oper- 
ated, such  a  thing  as  a  stationary  steam  plant  is  unknown,  ex- 
cept under  very  unusual  circumstances.  Even  on  the  moun- 
tain grades  of  the  trunk-line  railroads  it  will  only  be  a  few  years 
before  steam  power  will  be  unknown  to  the  transportation 
companies. 

It  is  to  produce  the  same  character  of  concentration  of  pro- 


466  ADDRESSES  OF  SAMUEL  INSTILL 

duction  and  distribution  of  energy  in  the  more  densely  settled 
portions  of  the  United  States,  in  that  portion  of  the  states  this 
side  of  the  Mississippi  River,  where  coal  is  relatively  cheap  and 
yet  where  it  is  being  used  up  at  such  a  rate  as  to  jeopard  seri- 
ously the  natural  resources  of  the  country,  that  I  am  mainly  in- 
terested in  talking  to  you  tonight.  All  that  I  am  trying  to 
show  you  is  that  the  character  of  business  done  in  California, 
in  Idaho,  in  Nevada,  in  Montana,  and  in  Colorado,  and  the 
other  water-power  states,  should  be  done  in  the  eastern  states 
in  precisely  the  same  way,  where  coal  is  the  basis  of  energy,  as 
it  is  done  where  water  is  the  basis  of  energy. 

The  comparisons  of  Fig.  16  are  interesting  simply  as  show- 
ing how  relatively  unimportant  is  the  lighting  in  connection 
with  most  of  the  large  electric-service  companies  in  this  country 
and  in  Europe.  The  diagram  shows  how  the  ratio  has  gone  up 
in  a  period  of  years.  The  top  line,  that  of  Chicago,  shows 
75  per  cent;  that  is  the  ratio  of  power  (motor  load)  to  the  total 
kilowatt-hours  sold,  and  that 
would  mean,  of  course,  that  light- 
ing represents  practically  the 
other  25  per  cent.  Berlin  comes 
next,  San  Francisco  next,  Phila- 
delphia next,  London  next,  and 
so  on  down  to  Boston. 

Fig.  17  is  interesting  in  show- 
ing what  becomes  of  the  money 
received  by  electric-service  com- 
panies, which  has  some  bearing 

Fig.  17.    What  was  Done  with  the  on  the  cost  of  our  product  and 
DoUar  of  Income  in  Chicago  in  our    seliing    price<       Thig    chart 

represents   the   operations  of   a 

company  which  has  an  income  of  about  $17,000,000  a  year. 
You  will  notice  that  one-half  of  the  cost  is  that  of  labor,  fuel, 
materials,  supplies,  and  miscellaneous  expenses.  Taxes  and 
municipal  compensation  amount  to  7  per  cent.  To  the  layman 
the  fact  that  the  fuel  costs  only  11  per  cent  while  the  right  to 
do  business  takes  7  per  cent  may  seem  to  be  somewhat  unusual. 


CENTRALIZATION  OF  SUPPLY 


467 


You  will  notice  that  one-half  of  all  the  expense  represents 
the  cost  of  money  and  the  right  to  do  business.  Thus,  11  cents 
out  of  every  dollar  goes  for  depreciation;  9  cents  out  of  every 
dollar  received  goes  for  interest  on  bonds;  15  cents  per  dollar 
of  income  is  paid  out  as  dividends  on  capital  stock.  The  two 
together  represent  about  6  per  cent  on  the  money  invested  in 


DIAGRAM  SHOWING 

RELATIVE  GROWTH    IN    INVESTMENT  AND 
I    ELECTRICITY    SOLD  IN    KILOWATT   HOURS 
YEARS  1896  TO  1913 


$80,000.000 


540,000,000 


720,000,000 


360,000.000 


240,000,000 


1901      1903     1905 
YEARS 


1909     1911     1913 


Fig.  18.     Ratio  of  Investment  to  Output  in 
Chicago 

the  property.  Seven  per  cent  surplus  is  set  aside,  partly  from 
the  work  of  the  selling  engineer  in  improving  earning  capacity 
on  the  money  invested. 

Relative  growth  in  investment  and  in  electricity  sold  in 
kilowatt-hours  for  the  years  1896  to  1913  is  shown  in  Fig.  18. 
The  solid  vertical  lines  represent  dollars,  and  the  shaded  por- 
tions represent  the  kilowatt-hours  sold.  I  do  not  know  that  I 
can  better  tell  the  story  of  the  concentration  of  power  supply 


468  ADDRESSES  OF  SAMUEL  INSULL 

than  that  chart  does.  In  1903  the  kilowatt-hours  sold  was 
somewhere  about  60,000,000,  and  you  go  on  to  1913  and  the 
number  of  kilowatt-hours  sold  is  nearly  840,000,000.  I  would 
call  that  change  the  saturation  of  the  dollar.  It  shows  what 
can  be  done  by  concentrating  production  for  all  purposes,  and 
as  a  result  improving  the  diversity  factor  and  improving  the 
load  factor. 

Generally  the  additions  to  plant  provided  out  of  reserves 
amount  to  the  proportion  of  about  three  dollars  for  every  two 


X 

X 

8HOWIN 
BALE 
p 
YEAR 

DIAGRAM 
3  EARNINGS  P 
DF  ELECTRICI 
ER  CAP»TA 
S  IOCS  TO  191 

-• 

«.2 

22-- 

Y 

I 

15 

0^ 

~ 

^ 

-^ 

•^"^ 

X 

-^ 

'•' 

'x 

px 

^ 

-" 

^ 

1895       1897       1899       19 

01       19 

IB      .19 

D5        IS 

I.1/ 

1909       19 

LI        IS 

;s 

Fig.  19.     Per  Capita  Sales  in  Chicago 

dollars  that  is  supplied  from  new  capital.  That  gives  you  some 
idea  of  the  stability  of  the  investment.1 

In  Fig.  19  are  shown  the  earnings  from  the  sale  of  electricity 
per  capita  for  the  years  1895  to  1913.  It  follows  practically, 
and  must  necessarily  follow,  the  curve  (Fig.  18)  which  shows 
the  relation  of  investment  to  output. 

Fig.  20  should  be  of  interest  to  everybody,  whether  he 
uses  electricity  or  not.  One  of  the  great,  vital  questions  before 
us  is  the  question  of  the  conservation  of  our  natural  resources. 

1.  Mr.  Insull's  point  here  is  shown  in  Fig.  6  of  chapter  on  "Electrical 
Securities,"  page  435. 


CENTRALIZATION  OF  SUPPLY 


469 


These  curves  give  the  pounds  of  coal  burned  by  this  electric- 
service  company  per  kilowatt-hour,  the  kilowatt-hours  gener- 
ated and  the  number  of  tons  of  coal  burned.  As  the  years 
have  gone  by,  from  1900  to  1913,  we  have  dropped  from  nearly 
seven  pounds  of  coal  per  kilowatt-hour  to  2.87  pounds.  As  a 
result,  notwithstanding  the  great  increase  in  our  output,  the 
tons  of  coal  burned  do  not  increase  in  any  such  proportion. 
That  tendency  is  going  on  continuously,  partly  from  the  work 
of  the  inventor,  partly  from  the  work  of  the  designing  engineer, 
and  partly  from  the  work  of  the  selling  engineer  in  improving 


1 

/n 

2,400.000 

CONSERVATION  OF  COAL 

/   o 

/ 

d 

2,100.000 

^-" 

B.BO 

~=--. 

,.  <  j^1 

r 

X5i 

/ 

^^°- 

2 

1,500.000 
1.200,000 

.1 

6.0 

X^ 

^ 

g 

Vv, 

c 

y 

£ 

\^ 

,v 

0 

I 

4.ia^?r 

> 

S 

\ 

/ 

r_^- 

" 

4 

J^ 

^ 

/[  " 

^> 

.o.-'s 

BB 

-• 

2  2  87 

600.000 
300,000 
n 

~>  ^ 

/^< 

»^r' 

^, 

'•" 

,-^: 

__;  — 

1 

Fig.  20 

the  character  of  our  load.  In  my  judgment,  in  the  next  few 
years,  the  pounds  of  coal  per  kilowatt-hour  will  drop  something 
like  twenty-five  to  thirty-five  per  cent,  which  necessarily  must 
have  an  important  bearing  upon  the  value  of  water-powers, 
especially  in  territory  where  water-powers  have  low  head,  and 
consequently  have  relatively  high  investment  in  proportion 
to  their  product. 

Fig.  21  is  really  a  balance  sheet.  It  is  taking  the  figures 
from  annual  balance  sheets  and  plotting  them  as  curves.  It 
is  the  index  as  to  whether  the  business  of  supplying  energy  is 
run  economically.  You  will  notice  that  notwithstanding  that 
the  income  per  kilowatt-hour  sold  goes  down  very  steadily 


470 


ADDRESSES  OF  SAMUEL  INSULL 


in  the  course  of  five  years,  the  income  per  dollar  of  investment 
goes  up  steadily.  During  the  same  time,  the  cost  per  kilowatt- 
hour  sold  goes  very  steadily  down,  dropping  practically  one 
cent,  and  follows  the  line  of  income.  That  cost  includes  oper- 
ating expenses,  interest  and  depreciation.  The  "  net  earnings 
per  dollar  of  investment"  line  goes  steadily  up. 


1910  1911 

YEARS 

Fig.  21 

SOME  OF  THE  PRACTICAL  BENEFITS  OF  CONCENTRATION 

In  the  previous  charts  I  have  given  you  some  of  the  results 
of  the  centralization  of  energy  production  and  distribution 
in  a  large  center  of  population.  As  I  stated  at  the  beginning, 
I  have  naturally  taken  the  figures  of  the  company  in  Chicago 
of  which  I  am  the  head.  They  were  the  most  available  for 
my  purpose,  and  I  naturally  am  able  to  make  such  use  of  them 
as  seems  necessary,  which  I  might  not  feel  at  liberty  to  do  with 
the  figures  relating  to  companies  managed  by  some  of  my  friends. 

Purposely  I  kept  the  transportation  business  out  of  any 
of  the  charts  that  I  present  to  you  this  evening.  We  generate 
in  Chicago  nearly  one  thousand  million  units  (kilowatt-hours), 


CENTRALIZATION  OF  SUPPLY  471 

and  a  little  over  one-half  of  our  annual  product  is  sold  to  the 
local  transportation  companies.  Except  so  far  as  the  produc- 
tion of  that  energy  has  a  bearing  upon  our  total  cost  and  our 
total  income,  and  our  income  per  dollar  of  investment,  I  have 
refrained  from  discussing  the  income  from  transportation,  or 
the  output  on  account  of  transportation. 

I  wanted  to  show  you  how  it  was  possible  to  get  a  large 
diversity  of  business,  having  an  extremely  good  load  factor,  in 
territory  where,  for  one  reason  or  another,  it  does  not  seem  pos- 
sible to  combine  all  the  production  of  energy  for  all  classes  of 
business.  I  might  follow  the  subject  still  further,  and  show 
you  the  advantages  alike  to  the  transportation  companies  and 
to  the  energy -producing  companies,  and  to  the  community  itself 
in  massing  all  classes  of  business,  as  I  stated  in  my  opening 
remarks  it  was  necessary  to  do  if  you  desire  to  get  the  highest 
possible  efficiency  in  production  and  the  highest  possible  effi- 
ciency in  earning  capacity  on  the  money  invested. 

[Mr.  Insull  here  repeated  some  of  the  data  and  estimates  in 
relation  to  concentration  of  energy  supply  in  the  state  of 
Illinois,  as  given  in  his  Franklin  Institute  address,  which  is  be- 
gun, in  this  volume,  on  page  357.] 

Fig.  22  shows  the  territory  in  Illinois  which  I  have  the  priv- 
ilege of  operating.  This  territory  extends  from  the  Mississippi 
River  on  the  west  almost  to  Terre  Haute,  Indiana,  on  the  east. 
The  method  of  distribution  is  to  place  the  generating  stations 
in  centers  where  there  is  relatively  a  large  amount  of  energy 
required,  or  where  the  energy  can  be  produced  very  cheaply. 
For  instance,  there  were  originally  in  this  whole  territory  63 
stations;  we  now  have  but  30,  and  expect  ultimately  to  have 
only  seven  or  eight.  The  main  centers  of  supply  are  at  Mat- 
toon,  at  Kincaid  at  the  mouth  of  the  coal  mines,  at  Beardstown, 
at  Belvidere,  and  several  other  places,  and  in  addition  we  take 
energy  from  the  Keokuk  hydro-electric  plant  on  the  Mississippi 
River. 

This  is  probably  as  good  an  illustration  as  I  can  present  to 
you  of  the  group  operation  of  properties,  typifying  the  produc- 
tion and  distribution  on  the  basis  of  concentration.  There 


472  ADDRESSES  OF  SAMUEL  INSULL 


Public  Service  Co.  of  Northern  Illi 
Illinois    Northern  Utilities  Co. 
Central  Illinois  Public  Service  Cov 
Tri-County  Light  &  Power  Co. 
Central  Illinois   Utilities  Co. 


Fig  22     Map  of  Illinois,  Illustrating  Group  Operation  of  Public-Utility 
Properties  (1914) 


CENTRALIZATION  OF  SUPPLY  473 

are  some  other  properties,  of  which  I  have  not  the  figures, 
operated  in  groups,  centered  at  Peoria  and  Springfield,  and  some 
other  groups  in  different  parts  of  the  territory  that  are  owned 
by  other  people. 

Even  in  so  densely  settled  a  state  as  Illinois,  having  such 
marvelous  wealth  above  ground  and  below  ground,  the  energy 
supply  is  confined  to  48  per  cent  of  the  population.  The  popu- 
lation that  I  am  particularly  interested  in  at  this  time  is  the 
other  52  per  cent. 

MONOPOLY,  REGULATION,  FAIR  TREATMENT  ON  BOTH 
SIDES  —  THESE  ARE  ESSENTIAL 

This  must  be  a  monopoly  business,  if  it  is  to  be  run  on 
economic  principles.  The  sound  economics  of  it  are  those  of 
monopoly,  and,  as  I  have  said,  it  is  an  unreasonable  thing  to 
expect  that  the  community,  whether  it  be  the  local  community, 
or  the  state  or  the  nation,  should  allow  business  of  this  character 
to  go  on  without  being  regulated;  but,  assuming  that  the  regu- 
lation is  intelligent,  the  investor  has  nothing  to  fear,  the  user 
has  nothing  to  fear.  If  companies  operating  over  large  areas 
have  not  the  good  judgment  to  run  their  business  in  such  a 
way  as  to  square  with  public  opinion,  the  commissions  that 
exist  throughout  most  of  the  states  today  are  ready  to  pro- 
tect the  users  of  the  product.  If  the  communities  are  so  ill- 
advised  as  to  be  guilty  of  unfairness  to  those  who  put  their 
money  into  these  properties,  the  commissions  are  there  to 
protect  the  investor. 

My  own  judgment  is  that  the  very  best  thing  that  has  hap- 
pened to  our  industry  —  it  is  an  inconvenience  to  men  like 
myself,  dealing  with  a  large  number  of  properties  in  various 
parts  of  the  country  —  but  the  very  best  thing  that  has  hap- 
pened to  our  industry  as  a  whole  within  the  last  few  years  has 
been  the  creation  of  commissions  to  regulate  the  electric  gener- 
ating and  distribution  business  and  kindred  interests. 

I  believe  that,  in  the  long  run,  regulation  means  protection. 
I  know  to  a  great  many  people  that  does  not  seem  to  be  a  very 


474  ADDRESSES  OF  SAMUEL  INSULL 

popular  side  of  things  at  this  time,  in  view  of  the  treatment,  or 
the  alleged  treatment,  the  railroads  are  receiving  at  the  hands 
of  the  Interstate  Commerce  Commission;  but  I  have  a  firm 
conviction  that  the  best  thing  for  our  securities,  the  best 
thing  for  the  widows  and  orphans  who  buy  them,  and  the  best 
thing  for  us,  is  that  we  should  stand  firmly  on  the  basis  that 
our  business  must  be  a  monopoly.  We  should  recognize  the 
fact,  if  it  is  a  monopoly,  that  it  should  be  regulated,  and  then 
we  should  insist  on  getting  fair  treatment,  and  in  order  to  get 
fair  treatment  we  must  be  fair  to  those  with  whom  we  are 
dealing.  . 

In  my  judgment,  within  the  next  few  years  there  will 
scarcely  be  a  spot  in  the  densely  settled  portions  of  the  country, 
and  especially  between  here  and,  say,  the  central  portion  of  the 
Mississippi  Valley,  where  you  will  be  unable  to  get  electric 
service  for  all  purposes  at  all  times  from  a  central  system  of 
generation  and  distribution. 

I  think  it  was  my  friend  Dr.  Steinmetz  who,  in  a  recent 
lecture,  drew  a  picture  of  the  transmission  lines  of  the  future 
running  across  the  country  something  like  the  trunk  lines  of  our 
transportation  systems. 

We  are  engaged  in  a  business  that  probably  has  a  more 
intimate  relation  to  more  classes  of  people  and  to  greater  num- 
bers in  the  community  than  any  other  line  of  public  service, 
governmental  or  private. 

There  is  no  reason  whatever  why  the  wheels  of  industry, 
the  avenues  of  transportation,  the  homes  of  the  poorest,  and 
all  other  classes  of  human  endeavor  should  not  add  to  the  great- 
ness of  the  business  of  the  generation  and  distribution  of  elec- 
trical energy. 

Sometimes  we  hear  (as  we  heard  a  representative  from  my 
own  state  recently  in  the  halls  of  Congress)  someone  decry  the 
fact  that  there  is  no  competition  in  a  business  where  the  price 
is  fixed  by  a  body  appointed  under  an  act  of  the  Legislature 
by  the  governor  of  the  state  —  a  business  which  cannot  be 
run  economically  except  as  a  monopoly.  Remarks  of  that 
kind  cannot  possibly  be  made  by  anyone  understanding  the 


CENTRALIZATION  OF  SUPPLY  475 

true  economics  of  the  situation.  I  think  that  much  can  be 
done  in  the  direction  of  the  conservation  of  resources,  in  les- 
sening the  severe  conditions  of  labor,  in  improving  the  condi- 
tions of  our  people  by  opening  up  our  rural  districts  to  manu- 
facturers, where  there  is  any  considerable  density  of  population; 
in  fact,  there  is  scarcely  a  direction  in  which  one  can  look 
without  seeing  possibilities  of  development  in  connection  with 
what  is  really  the  juvenile  industry  in  public  service  and  yet 
the  greatest  industry  in  public  service  today. 

I  am  not  speaking  to  an  audience  of  engineers  only,  but  to 
an  audience  with  a  strong  sprinkling  of  young  men,  to  those 
who  form  the  great  body  who  have  the  destinies  of  this  country 
in  their  hands.  There  is  no  blow  that  you  can  deal  to  your 
motherland,  there  is  no  greater  injury  that  you  can  do  to  your- 
selves, than  to  deal  unfairly  with  the  great  public-service 
enterprises  that  have  built  up  this  wonderful  republic.  I 
think  that  if  nothing  else  is  accomplished  by  my  friends  and 
myself,  in  appearing  before  you,  than  to  give  you  a  better 
conception  of  what  the  leaders  in  the  industry  are  after  than 
you  ordinarily  receive  from  reading  the  flippant  remarks  in  the 
average  daily  newspaper,  we  will  have  rendered  you  as  well  as 
ourselves  a  great  service. 


INDEX 


Abbott,  W.  L.,  164. 

Accounting,  Uniform,  4. 

Acrimonious  Discussion  of  the  Early 
Days,  60. 

Adams  Street  Generating  Station, 
Chicago,  21,  112,  177,  319,  350. 

Administrative  County  of  London 
Bill,  218. 

Advancement,  Opportunity  for  (Com- 
pany-Section Meeting,  1911),  234. 

Advertising,  Newspaper,  Value  of, 
116,  168. 

Allgemeine  Electricity  Company,  136, 
355. 

Alternating-Current  System  for  Elec- 
tric Lighting,  Introduction  of,  21, 
24,  50,  111,  118,  148,  176,  350. 

AJternating-Direct-Current  Combina- 
tion, 22. 

Aluminum  Arresters,  De  Ferranti's 
Work  on  (Steinmetz),  230. 

American  Institute  of  Electrical  En- 
gineers, Edison  Medal  Presenta- 
tion at  1910  Annual  Dinner  of, 
123. 

American  Institute  of  Electrical  En- 
gineers, Railroad  Electrification 
Address  before,  255,  308. 

American  Institute  of  Electrical  En- 
gineers, Speech  at  Dinner  During 
the  Chicago  1911  Convention  of, 
206. 

American  People,  Adaptability  of, 
114. 

Apartments,  Residence.  (See  Di- 
versity, Flats  and  Residence.) 

Appleton,  Wis.,  Generating  Station, 
20  (n.),  109,  1*7,  17*.  319. 

Appraisal  of  Public-Utility  Proper- 
ties, Necessity  of  tne  (Discussion  at 
New  York  1911  N.  E.  L.  A.  Con- 
vention), 197. 

Arc  Lamp.     (See  Lamp.) 

Armington  &  Sims  Engines  in  Early 
Edison  Stations,  19,  319,  320. 


Arnold,  Bion  J.,  66,  69,  309. 
Association   of   Edison    Illuminating 

Companies    at    Briarcliff,    Speech 

before  (1909),  73. 
Association   of   Edison    Illuminating 

Companies,  Formation  of,  2. 
Association   of   Edison   Illuminating 

Companies,    Presidential    Address 

of  1897  before,  1. 
Association    Island    Speech     (1913), 

Automobile,  Electric.     (See  Garages 
and  Vehicle.) 

Baker,  Alfred  L.,  244. 
Baker,  Frank  J.,  111. 
Balance  Sheet  Figures  Plotted  a& 

Curves,  469. 
Baltimore  Central-Station  Statistics, 

460,  462. 

Bankers  Should  Not  Oppose  Regula- 
tion of  Utilities,  441. 
Batchelor,  Charles,  xxvii,  110. 
Bell,  Alexander  Graham,  Inventor  of 

the  Telephone,  105,  125,  393. 
Berlin     Central-Station     Work,     22, 

116,  350,  447  (n.),  466. 
Berlin,    Early   Electric    Railway   in, 

110. 
Bills,  Electric-Light,  of  1892  and  1912, 

326. 

Bird,  Paul,  294. 
Boilers  at  Pearl  Street  Station,  18, 

319. 

Bonds  of  Holding  Companies,  440. 
Bonds.     (See    also    Prior    Lien    and 

Securities.) 
Boston,  Atlantic  Avenue  Station  in, 

22. 
Boston  and  Chicago  Load  Diagrams 

Compared,  282. 
Boston,    Diversity    of    Demand    in, 

265,  266,  277. 
Boston,  Edison  Electric  Illuminating 

Company  of,  141,  266,  277- 


477 


478 


INDEX 


Boston,  First  Central  Station  in, 
21,  349. 

Boston  Load  Factors,  Daily,  277, 
278,  280. 

Boston  Speech  at  General  Electric 
Company's  Dinner,  127. 

Boston  and  Suburbs,  Annual  Income 
in,  from  Sale  of  Electricity,  460. 

Brains  in  Control,  246,  335,  336, 
397. 

Brass,  Iron  and  Steel  Works,  Elec- 
trical Requirements  for,  452,  455. 

Brewster,  E.  L.,  316. 

Briarcliff  Speech  of  1909  before 
Edison  Association,  73. 

BriarclifF  Speech,  Suppression  of, 
91  (n.). 

Brickyards  and  Quarries,  Electrical 
Requirements  of,  451,  459. 

Brighton,  Arthur  Wright's  Work  at, 
217,  351. 

Brooklyn,  Central-Station  Work  in, 
24,  261,  350,  353. 

Brooklyn  Speech  (1912),  342. 

Brown,  Charles  E.,  103  (n.). 

Brush,  Charles  F.,  107,  393. 

Brush  Electric  Company,  50. 

Buffalo,  Possibilities  of  a  Steam- 
Electric  Plant  in,  202. 

Bunnell  (J.  H.)  &  Company,  106. 

Byllesby  Conventions  and  Dinners, 
Speeches  at,  116,  118,  167,  174, 
206,  249. 

Byllesby,  H.  M.,  118,  174,  241. 

By-Product  of  the  Electric-Service 
Business,  Electric  Lighting  to  Be- 
come a,  416. 

Cables.     (See  Submarine  and  Under- 
ground.) 
Canadian   Electric-Service   Problems 

Discussed     on     Coronation     Day 

(Canadian    Electrical    Association, 

1911),  199. 
Candle-Hour  Diagram  Showing  Lamp 

Efficiency  and  Decrease  in  Rates, 

431. 
Canvasser's    Productivity    Increased 

by  Advertising,  168. 
Capital    Account,    Conservatism    in 

Charging  to,  436. 
Capital  Always  Gets  Its  Pay,  207, 

244. 
Capital,    Annual     Turnover    of,     in 

Public-Utility  Businesses,  127,  197. 


Capital  and  Labor  Paid  about  Equal- 
ly Out  of  Central-Station  Earnings, 
164. 

Capital,  Large  Aggregations  of,  in 
Corporate  Form,  44. 

Capital,  Sources  of,  for  Plant  Ad- 
ditions in  Chicago,  435,  468. 

Capitalists,  Confidence  of,  in  Amer- 
ican Inventors,  114. 

Captains  of  Industry,  Prejudice  of, 
446. 

Carlton,   W.  G.  (Electrification),  313. 

Cement  Works  and  Others,  Electrical 
Requirements  of,  459. 

Census  Returns  by  States  on  Load 
Factor,  Income  and  Output,  463. 

Centralization  of  Energy  Supply 
(Y.  M.  C.  A.  Speech  in  New  York, 
1914),  445. 

Centralization  versus  Municipaliza- 
tion.  384,  412. 

Central-Station  Business,  Possibil- 
ities of  the  (1907),  48. 

Central-Station  Commercial  Devel- 
opment, Twenty-Five  Years  of 
(St.  Louis  N.  E.  L.  A.  Address 
of  1910),  144. 

Central-Station  Company,  Real  Func- 
tion of  a,  152,  207,  257,  355,  400, 
417. 

Central-Station  Companies  (1897),  1. 

Central  Station,  Development  of 
the  (Purdue  University  Lecture 
of  1898),  8. 

Central-Station  Development  through 
Three  Decades,  Stepping  Stones  of 
(Brooklyn  Speech  of  1912),  342. 

Central-Station  Economics.  (See 
Competition,  Economics,  Enter- 
priser, Massing,  Monopoly,  Rates, 
Regulation,  Sociological,  Welfare 
Work,  etc.) 

Central-Station,  Enlarging  the  Field 
of  the,  136,  207,  355,  400,  412, 
419,  439. 

Central-Station  Generation,  The  Re- 
lation of,  to  Railroad  Electrifica- 
tion (A.  I.  E.  E.  Address,  1912), 
255. 

Central-Station  Industry,  Edison  the 
Inventor  of  the,  333. 

Central-Station  Industry,  Invest- 
ment in.  (See  Investment.) 

Central-Station  Output  on  a  Square- 
Mile  Basis,  xxxvii,  400. 


INDEX 


479 


Central-Station  Statistics  (United 
States),  114,  146,  180,  349. 

Central  Station.  (See  also  many 
other  entries,  as  Advertising,  Al- 
ternating, Boilers,  Commonwealth, 
Cost,  Distribution,  Diversity,  Ed- 
ison, Electric,  Employees,  Engines, 
Fisk  Street,  Franchises,  Harrison 
Street,  Income,  Interest,  Invest- 
ment, Lamp,  Load,  Massing,  Mo- 
nopoly, National  Electric  Light  As- 
sociation, Pearl  Street,  Plant, 
Price,  Profits,  Public,  Railroad, 
Railway,  Rates,  Regulation,  Secu- 
rities, Sociological,  Transmission, 
Turbo-Generators,  Wiring,  etc.) 

Cheap  Electricity,  Advantages  of, 
97,  100,  339,  380,  390,  395,  403,  425. 

Cheap  Money  and  Low  Rates,  245. 

Cheap,  Why  Electrical  Energy  is, 
in  Chicago,  66,  69,  309,  410. 

Cheever,  Charles,  105. 

Chicago,  Annual  Income  in,  from 
Sale  of  Electricity,  460. 

Chicago  and  Boston  Load  Diagrams 
Compared,  282. 

Chicago,  Central-Station  Anniversary 
Celebration  in,  A  Quarter-Century 
(Company-Section  Meeting,  1912), 
316. 

Chicago,  Central-Station  Output  of, 
Greater  than  That  of  New  York 
and  Boston  Combined,  332,  411. 

Chicago  City  Railway  Company, 
City  Club  Discussion  (1908)  of 
the  21,000-Kilowatt  Contract  with, 
65. 

Chicago,  Commonwealth  Edison  Com- 
pany of.  (See  Commonwealth.) 

Chicago,  Diversity  of  Demand  in, 
85,  131,  211,  266,  272,  277,  338, 
448. 

Chicago,  Early  Electric  Railway  in, 
110. 

Chicago  Edison  Company,  Mr.  Insull 
Becomes  President  of,  1  (n.),  316. 

Chicago  Edison  Company,  Organiza- 
tion of  the,  21,  51,  112,  317. 

Chicago  Electric-Service  Statistics 
Compared  with  Those  of  Three 
Hundred  Central-Station  Under- 
takings in  Great  Britain,  419. 

Chicago,  Electrical  Energy  in,  Pro- 
duction and  Sale  of  (Electric 
Club  Speech  of  1909),  97. 


Chicago  Engineers'  Club  Speech 
(1911),  182. 

Chicago  Generating  Stations.  (See 
Adams  Street,  Fisk  Street,  Har- 
rison Street,  Northwest,  Quarry 
Street,  etc.) 

Chicago,  Income  Per  Capita  in,  460, 
468. 

Chicago  Load  Factors,  Daily,  274, 
275,  276,  277,  278. 

Chicago  and  London,  Electric-Service 
Conditions  in,  Compared.  (See 
London.) 

Chicago  Maximum-Load  Statistics. 
(See  Maximum  Load.) 

Chicago,  Motor  Load  in,  466. 

Chicago  N.  E.  L.  A.  Convention  of 
1898,  Presidential  Address  at,  34. 

Chicago  N.  E.  L.  A.  Convention  of 
1913,  Address  at,  405. 

Chicago  and  New  York  Load  Dia- 
grams Compared,  280,  281,  330, 
434. 

Chicago  and  New  York  as  Power 
Production  Centers,  201. 

Chicago  Public  Utilities,  Annual 
Income  (1911)  of,  329. 

Chicago  Public  Utilities,  Investment 
in,  113,  186,  243. 

Chicago  Railroad  Terminals,  Pro- 
posed Electrification  of,  282,  283, 
284,  285,  286. 

Chicago,  Rates  for  Railway  Elec- 
tricity Supply  in.  (See  Railway.) 

Chicago  Record-Herald,  Quotation 
from,  187. 

Chicago  Steam  Railroads  Electrified, 
Electric  Power  Requirements  of 
(Appendix  to  A.  I.  E.  E.  paper  of 
1912),  294. 

Chicago  Traction  Ordinances,  Finan- 
cial Aspects  of,  76,  120. 

Chicago  World's  Fair  (1893),  112, 
352. 

Citizens,  Duties  of,  to  Public-Service 
Industries,  185. 

City  Club  of  Chicago,  Speeches  be- 
fore, 54,  67,  338. 

Clamor  and  Guesswork  Do  Not 
Promote  Industry,  187. 

Clark,  Walton,  357  (n.). 

Coal,  Central-Station  Reserves  of, 
331. 

Coal  May  Become  a  Curiosity  (Edi- 
son), 251. 


480 


INDEX 


Coal  Mining,  Diversity  ir,  377. 

Coal  Mining  in  Illinois,  Electrical 
Requirements  for,  376. 

Coal.     (See  also  Fuel.) 

Coffin,  C.  A.,  137,  309,  354,  355. 

Cold  Weather  and  Railway  Load, 
131,  264,  270,  289. 

Collateral  Trusts,  440. 

Combinations,  Electric-Service,  The 
Logic  of,  135,  412. 

Combinations.  (See  also  Massing 
of  Production  and  Monopoly.) 

Commercial  Club  Speech  (Chicago, 
1911),  243. 

Commercial  Engineering.  (See  Sell- 
ing Engineering.) 

Commercial  Side  of  the  Business, 
Importance  of  the,  151,  351,  435. 

Commission  Control.  (See  Public- 
Utility  Commissions.) 

Commonwealth  Edison  Company 
Developed  by  the  Brains  within  the 
Organization,  335. 

Commonwealth  Edison  Company, 
Earnings  of.  Distribution  of,  329, 
466. 

Commonwealth  Edison  Company, 
Equipment  and  Statistics  of,  66,  98, 
121,  162,  253,  309,  321,  326,  401, 
410,  411,  417,  419,  420,  428,  429, 
435, 437, 460, 466, 467, 468, 469, 470. 

Commonwealth  Edison  Company, 
Financial  Chart  of,  470. 

Commonwealth  Edison  Company, 
Formation  of,  54  (n.). 

Commonwealth  Edison  Company, 
Generating  Stations  of,  Total 
Rating  of,  411,  420. 

Commonwealth  Edison  Company, 
Kilowatt-Hour  Output  of,  74,  116, 
162,  332,  411,  420,  429,  438,  467. 

Commonwealth  Edison  Company, 
Load  Factors  of,  82,  83,  163,  268, 
271,  277,  280,  324,  331,  420. 

Commonwealth  Edison  Company, 
Maximum-Load  Statistics  of.  (See 
Maximum  Load) . 

Commonwealth  Edison  Company, 
Quarter-Century  Anniversary  Cele- 
bration of,  816. 

Commonwealth  Edison  Company, 
Rates  of.  (See  Rates.) 

Commonwealth  Edison  Company  and 
the  Sanitary  District  of  Chicago, 
61,  340. 


Commonwealth     Edison      Company 

Section   of   the    National   Electric 

Light  Association,  Speeches  before, 

158,  234,  241,  316,  399. 
Commonwealth     Edison     Company, 

Welfare    Work    of.     (See    Pension 

Fund  and  Savings  Fund.) 
Company-Section     Organization     of 

N.  E.  L.  A.,  144,  159,  189,  234,  337. 
Company-Section  Organization,  Value 

of,  in  the  National  Electric  Light 

Association  (Speech  at  New  York 

1911  Convention),  189. 
Competition  Not  the  True  Regula- 
tive Force,  44,  155,  206,  399,  442, 

474. 
Concentration    of   Production.     (See 

Massing  of  Production.) 
Conservation  of  Natural  Resources, 

213,  247,  257,  293,  401,  408,  411, 

447,  466,  468,  475. 
Conservatism  in  Charging  to  Capital 

Account,  436. 
Construction,    The    Engineering    of, 

428,  434,  469. 
Contract,     Chicago     Railway.     (See 

Railway  Electricity  Supply.) 
Cooke,  Conrad,  on  Subdividing  the 

Electric  Light,  11. 

Cooke,  W.  F.,  and  the  Telegraph,  392. 
Cooper,  Peter,  125. 
Co-operation  Conference  of  1913  on 

Association  Island,  414  (n.). 
Country   Districts,    Boon   of   Cheap 

Electricity  in,  380,  390,  395,  396, 

402,  425,  440,  475. 
Copper,  Capital  in  the  Form  of,  424. 
Corporations,  Hostility  toward,  157, 

243. 

Corporations,    Industrial.     (See    In- 
dustrial.) 
Cos  Cob  Generating  Station  of  New 

York,   New  Haven  and  Hartford 

Railroad,  291. 
Cost  of  Electric  Lighting  Decreased 

While  Cost  of  Other  Commodities 

Increased,  55. 
Cost   of  Electrical   Energy   in   Lake 

County  District,  365. 
Cost  of  Electricity,  Interest  on  In- 
vestment   the    Greatest    Item   in. 

(See  Interest  on  Investment.) 
Cost    and    Price   of    Central-Station 

Electrical   Energy,    170,  411,    438, 

470. 


INDEX 


481 


Cost  of  Production,  Analysis  of  the, 

77. 
Cost,   Relative,   of  Electric-Lighting 

Supply,  59. 
Cost  of  Service  and  Welfare  Work, 

194. 
Cost,  Supplying  Electricity  below,  as 

a  Matter  of  Public  Policy  (Walter 

L.  Fisher),  62. 
Cost  System  of  Rates  (N.  E.  L.  A. 

Presidential     Address     of     1898), 

34,39. 
Cost  Per  Unit  of  Output,  Constant 

Reduction  in,  30,  438,  470. 
Credit    Association,    When    a,    Was 

Needed,  111. 
Criticism    with    Little     Knowledge, 

447. 

Crompton,  R.  E.,  13. 
Curtis  Steam  Turbine,  354. 
Customers,    Commonwealth    Edison 

Company's,  Number  of,  162,  184, 

329,  437. 
Customers,  Friendly  Relations  with, 

156,  179. 

Dawes,  Charles  G.,  119,  206. 

Daylight  Work  of  Central  Stations 
(1897),  146. 

Day  Load  in  Farming  District,  363. 

De  Ferranti,  S.  Z.,  and  Others,  Din- 
ner in  Honor  of  (1911),  215. 

De  Ferranti,  S.  Z.,  Speech  of,  at  New 
York  Dinner  (1911),  219. 

De  Ferranti,  S.  Z.,  Work  of,  180,  216, 
229  (Steinmetz),  256,  325. 

De  Laval  Steam  Turbine,  354. 

Demagogue,  Cry  of  the,  336. 

De  Muralt,  C.  L.  (Electrification), 
314. 

Department  Stores,  Electrical  Re- 
quirements of,  452,  453. 

Depreciation  and  Interest,  Impor- 
tance of,  194,  421,  434,  466. 

Deptford  Generating  Station.  (See 
London.) 

Destruction  Department,  xxxii,  349. 

Direct-Alternaling-Current  Combi- 
nation, 22. 

Direct  Coupling  of  Engine  and  Dyna- 
mo, Edison's  Early  Use  of,  20,  108, 
174,  319. 

Direct-Current  Network,  24. 

Discounts  in  Rate  Systems,  28,  40, 
149. 


Distribution  of  Electrical  Energy, 
Present  and  Future  (Association 
Island  Speech  of  1913),  414. 

Distribution  Expense  Much  Greater 
than  Generating  Expense,  202,  211. 

Distribution  System,  Edison,  6,  9, 
16,  33,  49,  251,  333,  393. 

Distribution  System,  Edison.  (See 
also  Three-Wire.) 

Distribution  System,  Improvement 
of,  178. 

Distribution  Systems,  Diversity  Fac- 
tor in,  211. 

Distribution.  (See  also  Massing  of 
Production.) 

Diversity  of  Demand  in  Cities.  (See 
Boston,  Chicago,  New  York,  etc.) 

Diversity  of  Demand  as  Illustrated 
by  a  Block  of  Apartments  in 
Chicago,  272,  448. 

Diversity  of  Demand  of  Large  Cus- 
tomers, 449,  450. 

Diversity  of  Demand  in  the  State  of 
Illinois,  378,  381,  401,  423. 

Diversity  Factor  in  Engineering 
Talent,  Utilization  of  (Steinmetz), 
309. 

Diversity  Factor,  Various  References 
to,  79,  85,  128,  153,  208,  257,  260, 
265,  267,  272,  274,  281,  338,  378, 
400,  434,  439,  447,  468. 

Diversity  Factor.  (See  also  Load 
Factor.) 

Doherty,  H.  L.,  189. 

Dollar  Invested,  Saturation  of  the, 
with  the  Electrical  Energy  Pro- 
duced, 437,  468. 

Dollar,  One,  Would  Buy,  Amount  of 
Electric  Light,  326,  431. 

Dollar  Point  of  View,  The,  348. 

Drainage  as  a  Central-Station  Load, 
370. 

Drexel,  Morgan  &  Co.,  175. 

Drug  Store  Rates  for  Electricity,  433. 

Dry  Goods  Stores,  Large,  as  Central- 
Station  Customers,  27. 

Dunn,  Gano,  255  (n.). 

Dunne,  Mayor,  and  Chicago  Electric- 
Service  Rates,  54,  340. 

Duplication,  Bad  Results  of,  184. 

Duplication  of  Production  is  Eco- 
nomic Waste  (Speech  at  Byllesby 
Dinner  to  Engineers,  1911),  206. 

Dynamo-Electric  Machines,  Wal- 
lace's Experiments  on,  15. 


INDEX 


Dynamo  Unit,  Jumbo.   (See  Jumbo.) 
Dynamos,  Early  Edison,  318,  319. 

Earnings,  Central-Station,  Dis- 
tribution of,  in  Chicago,  329,  466. 

Economic  Basis  of  Electric-Service 
Monopoly,  445. 

Economic  Lines,  Regulation  Should 
be  on,  188. 

Economic  Necessity,  Massing  of 
Energy  Production  an  (Boston 
Speech  of  1910  at  General  Electric 
Company's  Dinner),  127. 

Economic  Questions,  Employees 
Urged  to  Study  (Company-Section 
Meeting,  1910),  158. 

Economic  Waste,  Duplication  of 
Production  Is  (Speech  at  Byllesby 
Dinner  to  Engineers,  1911),  206. 

Economics,  Central-Station,  Learn- 
ing, by  Experience,  399,  438. 

Economics,  Central-Station.  (See 
also  Competition,  Enterpriser, 
Massing  of  Production,  Monopoly, 
Rates,  Regulation,  Sociological, 
Welfare  Work,  etc.) 

Economics  of  Railroad  Electrifica- 
tion, 256,  292,  311,  380,  402. 

Economy  Light  and  Power  Company, 
136  (n.). 

Edgar,  Charles  L.,  5,  141. 

Edison  (Thomas  A.),  Advice  of,  to 
Young  Men,  252. 

Edison,  Aphorisms  of,  251. 

Edison,  Application  of,  in  1880  for 
Electrical-Distribution  Patent,  9. 

Edison  Association.  (See  Associa- 
tion of  Edison  Illuminating  Com- 
panies.) 

Edison,  Birth  and  Parentage  of,  333. 

Edison  in  Boyhood  and  Youth, 
Anecdotes  of,  334. 

Edison,  Business  Methods  of,  in  the 
Eighties,  xxix,  xxxii. 

Edison,  Career  of,  Lessons  from  the, 
333. 

Edison  Central-Station  Companies  in 
1897,  Problems  of  the  (Edison  As- 
sociation Presidential  Address),  1. 

Edison  Distribution  System.  (See 
Distribution  and  Three- Wire.) 

Edison,  Early  Use  of  Direct  Coupling 
of  Engine  and  Dynamo  by,  20, 
108,  174,  319. 

Edison,  Early  Work  with,  xxv. 


Edison  Electric  Light  Company,  The 
Old,  and  Its  New  York  Head- 
quarters, xxvii,  317,  344. 

Edison  Electric-Lighting  System, 
xxix,  xxxvii,  7,  9,  13,  48,  107,  125, 
147,  250,  317,  333,  342. 

Edison  Electric  Railway,  49,  111,  330. 

Edison  as  an  Engineer,  251,  333,  348. 

Edison  General  Electric  Company, 
xxxi  (n.),  1  (n.),  6. 

Edison  (Thomas  A.)  and  Insull 
(Samuel),  Relations  of,  xv,  xx, 
xxvi,  xxxvi,  48,  103,  108,  118,  249, 
318,  334,  344. 

Edison  the  Inventor  of  the  Central- 
Station  Industry,  333. 

Edison  Machine  Works  in  Goerck 
Street,  New  York,  xxx,  xxxviii, 
318,  344. 

Edison  Medal,  Presentation  of  the, 
to  Elihu  Thomson,  123. 

Edison,  The  Name  of,  a  Talisman 
(Byllesby  Dinner,  1912),  249. 

Edison,  Personal  Appearance  of,  in 
1881,  xxviii. 

Edison  Risked  His  Private  Fortune, 
346. 

Edison  Sends  Quarter-Century  Greet- 
ing to  Chicago,  317. 

Edison  and  Swan  as  Inventors,  xxxviii, 
11. 

Edison,  Three- Wire  System  of.  (See 
Three-Wire.) 

Edison  Tubes  of  the  Early  Days, 
xxxi,  18,  50,  344,  345. 

Edison,  Work  of,  Value  of  the,  xvi, 
xxvii,  xxix,  xxxii,  7,  13,  19,  109, 
216,  250,  333,  343,  393,  416,  432. 

Edison's  Youthful  Private  Secretary, 
An  Intimate  Personal  Opinion  of 
the  Prospects  of  the  Electric  Light 
in  1881  from,  xxxv. 

Efficiency,  Savings  of,  Go  to  Cus- 
tomers, 193. 

Electric  Club  of  Chicago,  Speech  of 
1909  before,  97. 

Electric  Light,  Amount  of,  One 
Dollar  Would  Buy,  326,  431. 

Electric  Iright  in  1881,  Prospects  of, 
xxxv. 

Electric  Light,  Subdividing  the,  10, 
11,  48,  107. 

Electric  Lighting  to  Become  as  a 
By-Product  of  the  Electric-Service 
Business,  415,  420. 


INDEX 


483 


Electric  Lighting,  The  Beginnings  in, 
107,  111,  125,  220  (De  Ferranti), 
318,  342,  344. 

Electric  Lighting,  Cost  of,  Compared 
with  Cost  of  Other  Commodities, 
55. 

Electric  Lighting  (Incandescent), 
Proportion  of,  to  Total  Central- 
Station  Load,  417. 

Electric  Lighting.  (See  also  Central 
Station,  Edison,  Lamp,  Monopoly 
Rates,  Regulation,  etc.) 

Electric  Meter.     (See  Meter.) 

Electric  Motor.     (See  Motor.) 

Electric  Pen,  xxxvi. 

Electric-Service  Business,  Electric 
Lighting  to  Become  as  a  By-Prod- 
uct of  the,  415,  420. 

Electric  Service.  (See  also  Central 
Station,  Diversity,  Massing  of 
Production,  Monopoly,  Sociologi- 
cal, etc.) 

Electric  Railway.     (See  Railway.) 

Electric  Vehicle.  (See  Garages  and 
Vehicle.) 

Electrical  Development,  Thirty 
Years  of  (Electrical  Trades  As- 
sociation Speech,  1909),  103. 

Electrical  Energy,  Distribution  of, 
Present  and  Future  (Association 
Island  Speech  of  1913),  414. 

Electrical-Energy  Era,  The,  391, 
412,  425,  474. 

Electrical  Energy  Produced  Direct 
from  Coal  Experimentally,  33. 

Electrical  Energy,  Producers  of, 
Necessity  of  Being  the  Main,  84. 

Electrical  Engineers.  (See  Engi- 
neers and  Engineering.) 

Electrical  Manufacturers,  Thanks 
Due  to  the,  145. 

Electrical  Manufacturing  Problems 
of  the  Early  Days,  344. 

Electrical  Men,  Two,  Careers  of 
(Company-Section  Meeting,  1911), 
241. 

Electrical  Securities  (Address  to 
Investment  Bankers,  1913),  427. 

Electrical  Trades  Association  of 
Chicago,  1909  Speech  before, 
103. 

Electrical  Units  of  Measurement, 
110,  112,  350. 

Electricity  Cannot  be  Stored  Eco- 
nomically, 433. 


Electricity  and  the  Fertility  of  the 
Soil,  223  (De  Ferranti),  231  (Stein- 
metz). 

Electricity  Supply.  (See  Central 
Station,  Electric  Light,  Monopoly, 
Rates,  Regulation,  etc.) 

Electricity,  Universal  Application  of 
(De  Ferranti),  219. 

Electroplating,  Invention  of  (De 
Ferranti),  220. 

Elevators,  Influence  of,  in  Office 
Building  Demand,  455. 

Empire  Builders,  394,  397. 

Employees  of  Central-Station  Com- 
panies, Number  of,  191,  407. 

Employees,  Personal  Responsibility 
of.  (See  Public  Opinion.) 

Employees  Urged  to  Invest  in  the 
Business,  238. 

Employees  Urged  to  Study  Economic 
Questions  (Company-Section  Meet- 
ing, 1910),  158. 

Employees'  Welfare.     (See  Welfare.) 

Energy,  Production  and  Distribution 
of  (Franklin  Institute  Address 
of  1913),  357. 

Energy  Requirements  of  the  Com- 
munity, Supplying  the  (City  Club 
Speech  of  1912),  338. 

Energy  Supply,  Centralization  of 
(Y.  M.  C.  A.  Speech  in  New  York, 
1914),  445. 

Energy,  When,  Will  be  Purchased  as 
Energy,  425. 

Engine  and  Dynamo,  Edison's  Direct 
Coupling  of,  20,  108,  174,  319. 

Engine,  Reciprocating,  When  the, 
Reached  Its  Limit  in  Central- 
Station  Work,  137,  353. 

Engines  of  Pearl  Street  Station,  19, 
319. 

Engineer,  Consulting,  Self-interest 
of  the,  421. 

Engineer,  Prejudice  of  the,  an  Ob- 
stacle, 421,  446. 

Engineers,  Both  Successes  and  Fail- 
ures Due  to,  182. 

Engineers,  Electrical,  and  Stand- 
ardization, 35. 

Engineers,  The  Great,  May  be 
Crowned  as  Empire  Builders,  394. 

Engineers,  Young,  Advice  to.  (See 
Young  Engineers.) 

Engineering,  Electrical,  Economics 
and,  213. 


484 


INDEX 


Engineering  of  Fundamental  Im- 
portance in  Operating  Electric- 
Service  Properties,  428,  435. 

Engineering,  Influence  of,  on  Modern 
Civilization.  (University  of  Illi- 
nois Address,  1913),  392. 

Engineering.  (See  also  Construction 
and  Selling.) 

England.     (See  Great  Britain.) 

Enterpriser,  Place  of  the,  in  Public- 
Utility  Work,  xviii. 

Entertainment  at  Company-Section 
Meetings,  191. 

Erickson,  Halford,  xviii. 

Europe,  Electrical  Engineers  of, 
Work  of,  219. 

European  Conditions  Different  from 
American  Conditions,  447. 

Exclusive  Franchises.  (See  Monop- 
oly.) 

Experiments  in  Selling  Energy  which 
Have  Been  Criticized,  432. 

Fair  Return  on  Investment,  63. 

Fair  Treatment,  A  Plea  for,  475. 

Fan  Motors  on  Central-Station  Cir- 
cuits, 101. 

Farmers,  Illinois,  Electric  Service 
for,  359,  361,  363,  377. 

Farming  Districts.  (See  Country 
Districts.) 

Faure,  Camille,  Storage  Battery  of, 
110. 

Favoritism,  336. 

Federal  Government.  (See  Con- 
servation and  Hydro-Electric.) 

Feeder  System,  Edison's,  16,  18,  49, 
147. 

Ferguson,  Louis  A.,  316  (n.),  335, 
354. 

Ferranti.     (See  De  Ferranti.) 

Fertility  of  Land,  Electricity  and, 
223  (De  Ferranti),  231  (Steinmetz). 

Field,  Cyrus  W.,  125. 

Field,  Marshall,  336. 

Field,  Stephen  D.,  111. 

Financial  Aspects  of  Chicago  Trac- 
tion Ordinances,  76,  120. 

Financial  Difficulties  of  Early  Central- 
Station  Enterprises,  20,  175,  346, 
349. 

Financial  Responsibilities  of  Utility 
Managers,  406,  423. 

Financing  of  Railroad  Electricity 
Supply,  142,  155,  213,  292. 


Fisher,  Walter  L.,  61,  65. 

Fisk     Street     Generating     Station, 

Chicago,   54    (n.),    113,    136,    137, 

321,  354. 
Fisk    Street    Station,    Some    Inside 

History  about  the  Building  of,  137, 

354. 

Fixed  Charges,  Analysis  of,  77. 
Fixture,     Electric-Lighting,     Early, 

318. 
Flats  as  Central-Station  Customers, 

58,  139,  433. 

Forests.     (See  Conservation.) 
Fowler,  Edwin  J.,  294,  389. 
Fox,  William  A.,  162,  335. 
Franchises  Should  Insure  Protection, 

44,  47. 

Franchises,  Value  of,  120. 
Franklin,  Benjamin,  124,  391  (n.). 
Franklin    Institute    Address    (1913), 

357. 

Franklin  Medal,  391  (n.). 
Freeman,  W.  W.,  160,  190,  342. 
Freight-Terminal  Expense,  Railroad, 

403. 

Freight  Traffic  and  Switching  Re- 
quirements, Electrical,  269,  286, 

287,  294. 

Frequency.     (See  Periodicity.) 
Fuel   Economy   and   Central-Station 

Efficiency,     138,     177,     247,     324, 

401,  411,  469. 

Fuel  Expense  and  Maximum  Load,  58. 
Fuel    Handling,    Central-Station,    in 

Chicago,  98,  185,  331. 
Fuel    Resources    of    Great    Britain, 

Conservation  of  (De  Ferranti),  180, 

221. 
Fuel  Resources  of  the  United  States, 

Conservation  of,  Necessity  for  the, 

Will    Force    Massing    of    Energy 

Production,  4i4. 

Fuel     Statistics,     Chicago     Central- 
Station,  326,  329,  411,  466. 
Fulton,  Robert,  392. 

Galvanometer,  Watching  the,  346. 

Garages,  Public,  Electrical  Require- 
ments of,  454. 

Gas  and  Electricity  under  1898  Con- 
ditions, 32. 

Gas  and  Electricity,  Relation  of,  in 
1881,  xxvii. 

Gas  and  Electricity,  Relative  Rapid- 
ity of  Introduction  of,  350. 


INDEX 


485 


Gas,  Introduction  of,  392. 

Gas,  Sale  of,  Annual  Income  from, 
461. 

Gas  Shares,  The  1878  and  1879  Panic 
in,  15,  107,  342. 

Gasoline  Truck,  Advantages  of  the 
Electric  Vehicle  over  the  (Edison), 
251. 

Gear,  H.  B.,  294. 

General  Electric  Company,  Forma- 
tion of,  1  (n.). 

General  Electric  Company  Manu- 
factures 5000-Kilowatt  Turbo- 
generator for  Fisk  Street  Station, 
137,  354. 

General  Electric  Company,  Relation 
of  Edison  Central-Station  Com- 
panies with,  2,  6. 

General  Electric  Company's  Boston 
Dinner  (1910),  Speech  at,  127. 

General  Electric  Company's  Lamp 
Testing  Bureau,  5. 

Generating  Expense  and  Distributing 
Expense,  202,  211. 

Generating  Units,  Size  of,  69,  137, 
207,  311,  322,  338,  352,  355,  410, 
418. 

Generating  Units.  (See  also  Steam 
Turbine  and  Turbo-generators.) 

Generation  of  Electrical  Energy, 
Economics  of.  (See  Massing  of 
Production.) 

Germany,  Central-Station  Conditions 
in,  136. 

Gilchrist,  John  F.,  236,  335. 

Gilliland,  E.  T.,  106. 

Gladstone,  Mrs.,  Anecdote  of,  xxvi. 

Good- Will  of  the  Public,  Importance 
of  the,  122,  156,  179,  204,  356. 

Gouraud,  Colonel  George  E.,  xxv, 
xxxv  (n.). 

Government  Ownership.  (See  Public 
Ownership.) 

Government  Paternalism  and  Wel- 
fare Work,  195. 

Government  Policy  Relatiug  to 
Water-Power  Development.  (See 
Conservation  and  Hydro-electric.) 

Great  Britain,  Electrical  Engineers 
of,  Work  of,  219. 

Great  Britain,  Fuel  Resources  of, 
Conservation  of  (De  Ferranti), 
180,  221. 

Great  Britain,  Regulation  of  Utilities 
in,  442. 


Great  Britain,  Three  Hundred 
Central-Stations  in,  Chicago  Elec- 
tric-Service Statistics  Compared 
with  Those  of,  419. 

Group  Operation  of  Electrified  Rail- 
road Terminals,  282,  284,  304. 

Group  Operation  of  Utilities  in 
Illinois,  471. 

Gulick,  John  H.,  335. 

Hard  Knocks,  The  Discipline  of,  236. 

Hard  Work  Necessary  for  Achieve- 
ment, 398. 

Harriman,  E.  H.,  398. 

Harrison  Street  Station,  Chicago,  22, 
112,  162,320,352,418. 

Harrison  Street  Station  an  Example 
of  Obsolescence,  22  (n.),  162,  352, 
418. 

Heating  Devices,  Electric,  on  Central- 
Station  Circuits,  101. 

Heating  Purposes,  General,  Elec- 
tricity and,  332. 

Henrici  Restaurant  Speech  (About 
1900),  161. 

Heyworth,  James  O.,  182. 

Hill,  James  J.,  398. 

Holding  Companies,  The  Financing 
of,  440. 

Holmes,  F.  J.,  101. 

Home-Rule  Regulation,  246,  409,  442. 

Hooker,  George  E.,  64,  70. 

Hopkinson,  John,  and  the  Three- 
Wire  System,  17,  348. 

Hostility,  A  Certain,  to  Public- 
Service  Corporations  (Commercial 
Club,  1911),  243. 

Hotels,  Electrical  Requirements  of, 
459. 

House  of  Lords,  A  Committee  Meet- 
ing in,  218. 

Houston,  E.  J.,  107,  393. 

Howell,  Wilson  S.,  5. 

Hudson  and  Manhattan  Railroad 
Company,  259,  262. 

Humdrum  of  Work,  More  in  the 
Business  than,  194,  241. 

Hutchinson,  C.  T.  (Electrification), 
309. 

Hydro-Electric  Development  and  the 
Federal  Government,  408. 

Hydro-Electric  Development  of  the 
Future,  402. 

Hydro-Electric  Development  in  New 
England,  415,  423. 


INDEX 


Hydro-Electric  Development  and  Pro- 
duction, Cost  of,  201,  339,  404, 
462,  464,  465,  469. 

Ice  Making,  Electrical  Requirements 
for,  369,  452,  457. 

Ice  Making.  (See  also  Refrigera- 
tion.) 

Illinois  Electric-Service  Statistics,  388. 

Illinois,  Electrical  Possibilities  of,  358, 
366,  377,  381,  395,  401,  404,  422, 
426,  464,  471,  473. 

Illinois,  Group  Operation  of  Utilities 
in,  471. 

Illinois  River  Drainage  Districts, 
370. 

Illinois,  State  Public  Utilities  Com- 
mission of,  (340  n.). 

Illinois,  State  of,  Unified  Electricity 
Supply  in,  Possibilities  of  (Com- 
pany-Section Meeting,  1913),  399. 

Illinois,  University  of.  (See  Univer- 
sity.) 

Incandescent  Lamp.     (See  Lamp.) 

Income  and  Capitalization,  Ratio 
between,  in  Central-Station  Busi- 
ness, 127,  197,  437. 

Income,  Central-Station,  per  Capita 
in  Great  Britain  and  Chicago,  420. 

Income  of  Commonwealth  Edison 
Company,  Proportion  of,  due  to 
Lighting,  417,  428. 

Income  per  Customer  in  Chicago, 
437,  448. 

Income,  Kilowatt-Hour,  in  Chicago, 
116, 140,  411,  429, 438,  460,  470. 

Income  per  Kilowatt-Hour,  Reduc- 
tion in,  31,  429,  438,  470. 

Income  per  Kilowatt-Hour  in  Various 
Cities,  461,  462. 

Income  Per  Capita  in  Chicago,  460, 
468. 

Income,  Total,  from  Sales  of  Elec- 
tricity by  Commonwealth  Edison 
Company,  329,  420,  428. 

Industrial  Corporations,  Correct  Po- 
sition of,  207. 

Industrial  Problems,  Electric-Service 
Industry  and,  425. 

Industrial  Problems.  (See  also  Socio- 
logical Aspects.) 

Influence  of  Engineering  on  Modern 
Civilization  (University  of  Illinois 
Address,  1913),  392. 

Insulated  Wire.     (See  Wire.) 


Insull  (Samuel)  and  Edison  (Thomas 
A.),  Relations  of,  xv,  xx,  xxvi,  xxxvi, 
48,  103,  108,  118,  249,  318,  334,  344. 

Insull's  (Samuel)  Letter  of  1881  to 
Mr.  Kingsbury,  xxxv. 

Interest  on  Investment  the  Greatest 
Item  in  Cost  of  Electricity,  25, 
40,  246,  332,  409,  410,  434. 

Interborough  Rapid  Transit  Com- 
pany of  New  York,  143,  262,  263. 

Interest  and  Depreciation,  Impor- 
tance of,  194,  421,  434,  466. 

Interstate  Commerce  Commission 
and  the  Railroads,  474. 

Invention  of  the  Three- Wire  System, 
347. 

Inventor  of  the  Central-Station  In- 
dustry, Edison  the,  333. 

Inventors,  Electrical,  Accomplish- 
ments of,  114,  147,  431. 

Inventors,  The  Work  of,  392,  469. 

Investment  Bankers'  Association,  Ad- 
dress to  (1913),  427. 

Investment,  Central-Station,  Cost  per 
Kilowatt  of,  132,  364,  365,  382. 

Investment  in  the  Central-Station  In- 
dustry, 146, 180,  201,  349,  406,  420. 

Investment  in  Commonwealth  Edison 
Company's  Plants  (Annual),  435, 
437,  468. 

Investment  in  Commonwealth  Edison 
Company's  Plants  (Total),  329,  420, 
432,  438,  467. 

Investment  per  Customer  in  Chicago, 
437. 

Investment,  Fair  Return  on,  63. 

Investment.  Stability  of,  443. 

Investments.     (See  Securities.) 

Iron,  Steel  and  Brass  Works,  Elec- 
trical Requirements  of,  452,  455. 

Isolated  Plant,  The  Day  of  the,  Has 
Passed,  99,  132,  256. 

Jablochkoff  Candle,  104,  125,  393. 
Jackson,  D.  C.  (Electrification),  308. 
Jackson,  W.  B.  (Electrification),  313. 
Jobbing  Shops  versus  Manufacturing 

Establishments,  36. 
Johnson,  E.  H.,  xxvii,  xxxix,  125,  349. 
Jumbo  Machine  of  the  Early  Eighties, 

19,  319. 
Junior    and     Prior-Lien     Securities, 

427,  434,  440. 
Junk  Pile,  Need  of  a,  73. 
Junkersfeld,  Peter,  294. 


INDEX 


487 


Kelvin  Lord,  on  Edison's  Inventions, 
11,  12,  13. 

Kelvin,  Lord,  and  the  Storage  Bat- 
tery, 110. 

Keokuk  Hydro-Electric  Plant,  Tak- 
ing Energy  from,  471. 

Kingsbury,  J.  E.,  xxxv. 

Klingenberg,  G.,  447  (n.). 

Know  All  You  Can  about  Your  Own 
Business,  457. 

Kohlsaat,  H.  H.,  167. 

Kruesi,  John,  xxxi,  50,  344. 

Labor  and  Capital  Paid  About 
Equally  Out  of  Central-Station 
Earnings,  164. 

Labor  Invariably  Gets  Its  Wage, 
244. 

Labor-Saving  Character  of  Electricity 
(De  Ferranti),  224. 

Lake  County,  EL,  Electrical  Re- 
quirements of,  358,  363,  366. 

Lake,  E.  N.  (Electrification),  315. 

Lamp,  Arc,  Use  of  the,  32,  342. 

Lamp,  Electric  Incandescent,  In- 
vention of  the,  9,  342. 

Lamp,  Incandescent,  Efficiency  of, 
18,  175,  343,  431. 

Lamp  (Incandescent),  First,  Factory, 
414. 

Lamp,  Incandescent,  The  High-Re- 
sistance, 9. 

Lamp,  Paper-Filament  (1880),  107. 

Lamp  Specifications,  39. 

Lamp,  Tantalum,  176,  431. 

Lamp-Testing  Bureau,  Establish- 
ment of,  5. 

Lamp,  Tungsten,  15  (n.),  149, 176, 431. 

Lamps,  Edison  Incandescent,  Early 
Specimens  of,  318. 

Lamps,  Incandescent,  Cost  of  (1881), 
414. 

Large  Business,  Getting  the,  117, 
130,  352,  421. 

Larger  Aspects,  The,  of  Making  and 
Selling  Electrical  Energy  (Briar- 
cliff  Speech  of  1909),  73. 

Lauffen-Frankfort  Electrical  Trans- 
mission, 112  (n.). 

Law,  C.  C.,  14. 

Lee,  W.  S.  (Electrification),  313. 

Licensee  and  Manufacturing  Com- 
panies, 6. 

Lieb,  John  W.,  Jr.  (Electrification), 


Lightning  Rods,  124. 

Linemen  May  be  Educated  for 
Executive  Positions,  190. 

Load  Factor  of  Farming  District, 
363,  422. 

Load  Factor,  Improvement  of,  the 
Central-Station  Problem,  128,  138, 
257,  273,  433,  468. 

Load  Factor,  Low,  Makes  Lighting 
Business  Alone  Undesirable,  418, 
419. 

Load  Factor  and  Per  Capita  Statistics 
of  Various  Cities  and  States,  461, 
462,  463,  464. 

Load  Factor,  The  Question  of  (Pur- 
due, 1898),  27. 

Load  Factors,  Daily,  of  Boston, 
Chicago  and  New  York  (Diagrams 
and  Tables),  274,  275,  276,  277, 
278,  279,  280,  281. 

Load  Factors,  Railway  and  Railroad, 
79,  270,  291,  297. 

Load  Factors  of  Various  Classes  of 
Commercial  Customers,  26,  58, 
81,  268,  368,  369.  453,  454,  455, 
457,  459. 

Load  Factors.  (See  also  Diversity 
and  Rates.) 

Locomotive,  Electric  (1912),  330. 

London  and  Chicago,  Electric-Service 
Conditions  in,  Compared,  162, 
171,  185,  447  (n.). 

London  and  Chicago,  Selling  of  Elec- 
tricity in,  Compared  (Byllesby  1911 
Convention  Speech),  167. 

London,  Deptford  Station  in,  216. 

London,  Electric-Service  Income  and 
Output  in,  462. 

London,  Proposed  Wholesaling  of  Elec- 
tricity in,  218. 

London  Times,  Quotation  from,  401. 

Low-Head  Hydro-Electric  Develop- 
ment, 469. 

Low  Rates,  Apparently,  May  Mean 
Good  Business,  81,  281. 

Low  Rates,  Cheap  Money  and,  245. 

Low  Rates  of  Great  Importance,  153, 
426. 

Luepke,  Paul,  189  (n.). 

Lundy,  A.  D.,  111. 

Mabbs,  J.  W.,  102. 

McClellan,  William  (Electrification), 

313. 
McCormick,  Robert  R.,  60. 


488 


INDEX 


McKana,  George  E.,  389. 

Machinery,  Electrical,  Standard  Speci- 
fications for,  Recommended,  35. 

Mailloux,  C.  O.  (Electrification),  314. 

Manufacturers,  Electrical.  (See  Elec- 
trical Manufacturers.) 

Manufacturers,  Miscellaneous,  Elec- 
trical Requirements  of,  452,  457. 

Manufacturing,  Standardization  in, 
36. 

Manufacturing.    (See  also  Electrical.) 

Marconi,  William,  113,  393. 

Martin,  T.  Commerford,  xxv,  146. 

Massing  of  Energy  Production  an 
Economic  Necessity  (Boston  Speech 
of  1910  at  General  Electric  Com- 
pany's Dinner),  127. 

Massing  of  Production  and  Distribu- 
tion, Various  References  to,  62, 
75,  96,  127,  148,  152,  170,  176,  212, 
239,  253,  275,  292,  311,  321,  335, 
353,  355,  400,  411,  418,  421,  439, 
465,  468,  471. 

Matchless  Electric  Light,  318. 

Maximum-Demand  System  of  Charg- 
ing, 28,  42,  410. 

Maximum-Demand  System.  (See  also 
Wright  System  of  Rates.) 

Maximum  Load  in  Chicago,  Statistics 
of,  24,  57,  162,  177,  185,  253,  321, 
324,  411. 

Maximum  Load,  Influence  of,  on 
Rates,  57. 

Maximum  Load  of  Railroads,  Time 
of,  210. 

Meat-Packing  Industries,  Stockyards 
and,  Electrical  Requirements  of 
457. 

Mellen,  Charles  S.,  «10. 

Menlo  Park,  N.  J.,  Early  Electrical 
Work  in,  xxxviii,  48,  107,  108,  317, 
342,  414. 

Merriam,  Charles  E.,  71. 

Merz,  C.  H.,  and  Others,  Dinner  in 
Honor  of,  215. 

Merz,  C.  H.,  Work  of,  218. 

Meter,  Electric,  in  1881,  xxxvii. 

Meter,  Two-Dial,  28. 

Meter,  Wright  Demand,  450. 

Metering  Devices,  Printing-Tape  450. 

Metering  on  a  Lamp-Hour  Basis,  350. 

Metropolitan  Street  Railway  Com- 
pany of  New  York,  85. 

Milan,  Italy,  Early  Central  Station 
in,  318. 


Mining.     (See  Coal.) 

Minneapolis,  Electric-Service  Income 
and  Output  in,  462. 

Minneapolis  and  St.  Paul,  Cheap 
Power  Helped  to  Develop,  404. 

Mississippi  River  Hydro-Electric  De- 
velopment at  Keokuk,  Taking  En- 
ergy from,  471. 

Mississippi  Valley,  Electric  Service 
in,  Prospect  of,  336,  380,  396,  474. 

Mitten,  T.  E.,  94. 

Money  Making,  Pleasures  Beyond, 
194,  241. 

Monopoly  in  the  Electric-Light  In- 
dustry, Necessity  for,  Recognized 
(Vanderlip),  227. 

Monopoly,  Get  a,  Sell  Your  Product 
at  a  Price  Which  Will  Enable  You 
to  (Byllesby  1910  Convention 
Speech),  116. 

Monopoly,  The  Obligations  of,  Must 
be  Accepted  (Speech  at  Byllesby 
1910  Dinner),  118. 

Monopoly  the  Only  Way  to  Get  the 
Results,  184,  445. 

Monopoly  in  Public-Utility  Service, 
Various  References  to,  45,  60,  67, 
75,  94,  99,  116,  118,  142,  155,  178, 
183,  184,  253,  336,  339,  356,  384, 
399,  409,  417,  442,  445,  447,  464, 
473. 

Morgan,  J.  Pierpont,  175,  349. 

Morse,  S.  F.  B.,  and  the  Telegraph, 
124,  392. 

Mortgage  Trust  Deeds,  427,  440. 

Morton,  Professor  Henry,  on  Sub- 
dividing the  Electric  Light,  10. 

Motor,  Electric,  Edison  on  the  Future 
of  the,  251. 

Motor  Load.  (See Non-Lighting  Load.) 

Motors,  Electric,  Early  Realization 
of  Advantages  of,  xxxvii,  48,  343, 
414. 

Multiple-Arc  Distribution,  16, 49, 349. 

Municipal  Compensation.  (See  Taxes.) 

Municipal  Ownership  and  Operation. 
(See  Public  Ownership.) 

Municipality's  Right  of  Purchase,  46. 

Murray,  W.  S.  (Electrification), 


299, 


308,  313. 


National  Board  of  Fire  Under- 
writers, Co-operation  with,  38. 

National  Electric  Lamp  Association, 
414  (n.). 


INDEX 


489 


National  Electric  Light  Association, 
Commonwealth  Edison  Company 
Section  of.  (See  Commonwealth.) 

National  Electric  Light  Association, 
Company-Section  Organization  of, 
144,  159,  189,  234,  337. 

National  Electric  Light  Association 
Presidential  Address  (1898),  34. 

National  Electric  Light  Association, 
Public  Policy  Committee  of.  (See 
Public  Policy  Committee.) 

National  Electric  Light  Association, 
St.  Louis  (1910)  Convention  of, 
Address  at,  144. 

National  Electric  Light  Association, 
Work  of  the.  Value  of  the,  158, 
200,  203,  235. 

New  England  Manufacturing,  Re- 
lation of  Water-Power  to,  396, 
404,  415. 

New  England,  Per  Capita  Con- 
sumption of  Electricity  in,  141. 

New  Jersey,  Electrical  Possibilities 
of,  390. 

New  York  Central  Railroad's  New 
York  Terminal  Electrification,  85, 
90, 101, 143, 209, 263, 264, 273, 310. 

New  York  City,  Annual  Income  in, 
from  Sale  of  Electricity,  460. 

New  York  City  and  Chicago,  Load 
Diagrams  of,  Compared,  280,  281, 
330,  434. 

New  York  City  and  Chicago  as  Power 
Production  Centers,  201. 

New  York  City,  Diversity  of  De- 
mand in,  211,  259,  260,  261,  262, 
263,  274,  275,  292,  423. 

New  York  City.  Duane  Street  Station 
in,  22. 

New  York  City,  Load  Factors  in, 
143,  260,  261,  262,  263,  279,  281. 

New  York  City,  Massing  of  Produc- 
duction  in,  Proposed,  213,  292. 

New  York  City,  Pearl  Street  Station 
in.  (See  Pearl  Street.) 

New  York  City,  United  Electric  Light 
and  Power  Company  of,  261. 

New  York  City  Y.  M.  C.  A.  Speech 
(1914),  445. 

New  York  Edison  Company,  82,  85, 
116,  143,  261,  280,  331. 

New  York,  Edison  Electric  Illuminat- 
ing Company  of,  18,  85,  118,  146. 

New  York  N.  E.  L.  A.  Convention  of 
1911.  Speeches  at,  189,  193,  197. 


New  York,  New  Haven  and  Hartford 
Railroad,  Electrification  of,  135, 
153,  263,  291. 

Newspapers.  (See  Advertising  and 
Press.) 

Niagara  Falls,  Electric-Service  In- 
come and  Output  in,  462. 

Niagara  Falls,  N.  Y.,  Convention  of 
the  Edison  Association  (1897), 
Presidential  Address  at,  1. 

Niagara  Falls,  Ont.,  Convention 
(1911)  of  Canadian  Electrical  Asso- 
ciation, 199. 

Niagara  Falls  Power  Development, 
201,  257. 

Nitrogen,  Fixed,  of  Coal,  Getting  at 
the  (De  Ferranti),  223. 

Nomenclature.     (See  Terminology.) 

Non-Lighting  Load,  Importance  of, 
416,  420,  466. 

North  Clark  Street  Station,  Chicago, 
320. 

North  Shore  Electric  Company,  111, 
136  (n.). 

Northwest  Generating  Station,  Chi- 
cago, 321. 

Obligations,  The,  of  Monopoly  Must 
be  Accepted  (Byllesby  1910  Din- 
ner), 118. 

Off-Peak  Business,  Electrical  Drain- 
age an,  373. 

Off-Peak  Rate,  454. 

Off-Peak  Schedule  for  Electrical  Ice 
Making,  369. 

Office  Boy,  From,  to  Vice-President, 
235. 

Office  Buildings  as  Central-Station 
Customers,  26,  40,  58,  454. 

One  Dollar.     (See  Dollar.) 

Operating  Charges,  Analysis  of,  77. 

Operating  Cost  and  Interest  Cost,  25. 

Operating  Expenses  of  Common- 
wealth Edison  Company,  329,  466. 

Opportunity  for  Advancement  (Com- 
pany-Section Meeting,  1911),  234. 

Orton,  William,  250. 

Output,  Increase  of,  Rates  Decrease 
with,  99,  461. 

Output  and  Investment,  433. 

Output,  Kilowatt-Hour,  of  Common- 
wealth Edison  Company,  74,  116, 
162,  332,  411,  420,  429,  438,  467. 

Overcapitalization,  Regulation  Will 
Prevent,  442. 


490 


INDEX 


Pacific  Coast,  Massing  of  Production 
on,  153,  464. 

Panics  and  the  Electric-Service  In- 
dustry, 201. 

Paris  Exposition  and  Electrical  Con- 
gress (1881),  xxvi  (n.),  110. 

Paris  Exposition  and  Electrical  Con- 
gress (1889),  in,  350. 

Parker,  Lee  H.  (Electrification),  314. 

Parsons,  Hon.  Sir  Charles  A.,  and  the 
Steam  Turbine,  353. 

Partrick  &  Carter,  106. 

Passenger  Traffic,  Railroad,  Electrical 
Requirements  of,  269,  288,  300. 

Patent,  Electrical-Distribution,  Edi- 
son's 1880  Application  for,  9. 

Patent  Protection  for  Licensee  Com- 
panies, 6. 

Peak  Load  Conditions  Explained, 
57,  433. 

Pearl  Street  Station  in  New  York 
City,  xxx,  15,  17,  109,  147,  174,  319, 
345. 

Pennsylvania,  Electrical  Possibilities 
of  the  State  of,  389. 

Pennsylvania  Railroad's  New  York 
Terminal  Electrification,  92,  101, 
209,  263,  273,  309. 

Pension  Fund  (Service  Annuity)  of 
the  Commonwealth  Edison  Com- 
pany, 238. 

Per  Capita  Statistics  of  the  Sale  of 
Electricity  and  Gas,  420  460,  461, 
462,  463,  464,  468. 

Periodicity,  Effect  of,  Explained  in 
City  Club  Discussion,  70. 

Pessimism,  Get  Rid  of.    173. 

Philadelphia,  Annual  Income  in,  from 
Sale  of  Electricity,  460. 

Philadelphia  Company-Section 
Work,  190. 

Philadelphia  Public-Service  Prob- 
lems, 388. 

Phonograph,  Invention  of  the,  14. 

Plant  Additions  in  Chicago,  Sources 
of  Capital  for,  435,  468. 

Plant  Equipment,  Reserves  of,  in 
Small  Illinois  Towns,  381. 

Policeman,  Friendly,  A  Sleepy  Private 
Secretary  and  a,  345. 

Political  versus  Industrial  Manage- 
ment, 43,  336. 

Politics,  Keep  Out  of,  122. 

Politics,  Utilities  Should  Not  be  the 
Football  of,  187,  336,  442. 


Polyphase-Current    Patents,  Tesla's, 

112. 

Porter-Allen  Engine,  108. 
Power  Business.     (See  Non-Lighting 

Load.) 

Power  Transmission.    (See  Transmis- 
sion.) 
Present-Day  Opportunities  Are  Very 

Great,  397. 
Press,  Attitude  of  the,  toward  Public 

Utilities,  244,  475. 
Price,   Cost  and,   of  Central-Station 

Electrical  Energy  in  Chicago,  411, 

438,  460,  470. 
Price,  Selling,  Based  on  Cost,  39,  170, 

438,  470. 

Pride  and  Prejudice,  446. 
Print-Shop  Rates  for  Electricity,  433. 
Prior-Lien  and  Junior  Securities,  427, 

434,  440. 
Private    Secretary    to    Edison,    xvi, 

xxvii,  xxix,  xxxix,  48,  318,  345. 
Private  Service,  Public  Life  and,  398. 
Production,  Cost  of,  Analysis  of  the, 

77. 

Production  and  Distribution  of  Ener- 
gy (Franklin  Institute  Address  of 

1913),  357. 

Production,  Massing  of.     (See  Mass- 
Profit  from  Massing  of  Production  and 

Distribution,  447. 
Profits,    Central-Station,    Curve    of, 

Proposed  (Mabbs),  102. 
Profits,  Small  Margin  of,  in  Efficient 

Plants,  139. 
Public    Attitude    toward    Industries 

(Vanderlip),  226. 
Public   Control   of   Utilities    (N.    E. 

L.  A.  Presidential  Address  of  1898), 

34,  42,  47. 

Public  Life  and  Private  Service,  398. 
Public  Opinion,  Central-Station  Em- 
ployees and,  191,  204,  356. 
Public  Ownership  and  Operation  of 

Utilities,  42,  61,  384,  407,  412,  417. 
Public   Policy,   Broad    Questions    of 

(Address  at  Chicago  N.  E.  L.  A. 

Convention  of  1913),  405. 
Public  Policy  Committee  (N.  E.  L. 

A.),  Work  of  the,  193,  237,  405. 
Public,    Regulation   of    Utilities    by 

the.     (See  Regulation.) 
Public  Service  Company  of  Northern 

Illinois,  111  (n.),  136  (n.). 


INDEX 


491 


Public  Service  Corporation  of  New 
Jersey,  259,  262. 

Public-Service  Corporations,  A  Cer- 
tain Hostility  to  (Commercial 
Club,  1911),  243. 

Public-Service  Corporations,  Rela- 
tions of  the  Public  to  the  (Chicago 
Engineers'  Club,  1911),  182. 

Public,  Taking  the,  into  One's  Con- 
fidence, 91  (n.). 

Public-Utility  Commissions,  Regula- 
tion by,  45,  121,  156,  340  (n.),  408, 
441,  473. 

Public-Utility  Commissioner,  A  Col- 
loquy with  a,  94. 

Public-Utility  Managers'  Financial 
Responsibilities,  406,  423. 

Public-Utility  Properties,  Appraisal 
of,  197. 

Public  Utilities,  Importance  of,  in 
the  Life  of  Chicago,  186,  243. 

Pullman,  George  M.,  336. 

Pumping.  (See  Drainage  and 
Water.) 

Purchase,  Municipality's  Right  of,  46. 

Purdue  University  Lecture  on  the 
Development  of  the  Central  Sta- 
tion, 8. 

Quadruples  Telegraphy,  Edison's 
Invention  of,  250. 

Quarries  and  Brickyards,  Electrical 
Requirements  of,  451,  459. 

Quarry  Street  Generating  Station, 
Chicago,  321. 

Quarter-Century  Central-Station  An- 
niversary Celebration  in  Chicago 
(Company-Section  Meeting,  1912), 
316. 

Railroad  Electrification,  Discussion 
on  (American  Institute  of  Electrical 
Engineers),  308. 

Railroad  Electrification,  Economics 
of.  (See  Economics.) 

Railroad  Electrification,  Edison  on, 
251. 

Railroad  Electrification,  How,  Will 
Probably  be  Brought  About,  380. 

Railroad  Electrification,  The  Re- 
lation of  Central-Station  Genera- 
tion to  (A.  I.  E.  E.  Address,  1912), 
255,  308. 

Railroad  Financing.  (See  Financ- 
ing.) 


Railroad  Maximum-Demand  Period 
Favorable  to  Central-Station  Op- 
eration, 210. 

Railroad  Terminals,  Chicago,  Pro- 
posed Electrification  of,  282,  283, 
284,  285,  286,  294. 

Railroads,  Electrification  of,  Various 
References  to,  75,  91,  93,  100,  117, 
133,  142,  154,  181,  208,  251,  258, 
282,  283,  284,  285,  286,  292,  312, 
338,  380,  402,  425,  465. 

Railroads,  Producing  Energy  for, 
Cost  of,  90,  209. 

Railroads.  (See  also  Freight,  Passen- 
ger, and  Suburban.) 

Railway  Contracts,  Swing  Maximum 
in,  90. 

Railway,  Electric,  Edison,  49,  111, 
330. 

Railway,  Electric,  Introduction  of, 
110,  111. 

Railway,  Electric,  Statistics,  114. 

Railway  Electricity  Supply  in  Chicago, 
Central-Station  Output  for,  74,  429. 
471. 

Railway  Electricity  Supply  in  Chicago, 
Rates  for,  60,  65,  66,  67,  79,  89, 
430. 

Railway  Load  Requirements  in 
Northern  Illinois,  367. 

Railway  and  Railroad  Load  Factors, 
79,  269,  291,  297. 

Rate,  Off-Peak.     (See  Off-Peak.) 

Rate  Question  (1897),  4. 

Rates  Affected  by  Load  Factor,  27, 
79,  129, 139,  150,  351,  418,  434,  450, 
462. 

Rates  in  Chicago,  Voluntary  Reduc- 
tion of,  340,  438. 

Rates,  Cost  System  of  (N.  E.  L.  A. 
Presidential  Address  of  1898),  39, 
47. 

Rates  Decrease  with  Increase  of 
Output,  99,  140,  430,  438,  462. 

Rates,  Electric-Service,  Elucidation 
of,  for  Business  Men  (City  Club 
Discussion  of  1908),  54. 

Rates,  Flat,  40,  351. 

Rates  for  Hydro-Electric  Energy  in 
Rocky  Mountain  Region  and  on 
Pacific  Coast,  464,  465. 

Rates,  Lighting  (1912),  in  Chicago, 
325,  430. 

Rates,  Lighting  (1913),  in  Chicago 
and  Other  American  Cities,  432. 


492 


INDEX 


Rates,  Low,  Apparently,  May  Mean 
Good  Business,  81,  281. 

Rates,  Low,  Cheap  Money  and,  245. 

Rates,  Low,  of  Great  Importance,  153, 
426, 

Rates,  Maximum-Demand.  (See 
Maximum-Demand  and  Wright.) 

Rates  for  Railway  Electricity  Supply 
in  Chicago.  (See  Railway  Elec- 
tricity Supply  in  Chicago,  Rates 
for.) 

Rates,  Residence,  in  Chicago,  74  (n.), 
139,  432. 

Rates  in  Review  (1910),  149. 

Rates,  Stability  of,  Regulation  and, 
442. 

Rates,  Wright  System  of.  (See 
Wright.) 

Rates.     (See  also  Income.) 

Rathenau,  Dr.  Emil,  Advice  of,  136, 
355. 

Rating  of  Dynamo-Electric  Machines, 
37. 

Reclamation  of  Swamps,  Electricity 
and,  373. 

Refrigeration  and  Ice-Making  Load, 
Influence  of,  on  Load  Factor,  268. 

Regulating  Bodies  May  Insist  on 
Centralization,  446. 

Regulation  of  Utilities  by  the  Public 
Advocated,  44,  47,  60,  119,  155, 
178,  188,  246,  340,  399,  408,  441, 
473. 

Relations  of  the  Public  to  the  Public- 
Service  Corporations  (Chicago  En- 
gineers' Club,  1911),  182. 

Reserve  Accounts,  Necessity  for,  436, 
444. 

Reserves  of  Plant  Equipment  in  Small 
Illinois  Towns,  381. 

Residence  Customers  in  Chicago 
(1908-1909),  Statistics  of,  139. 

Resistances  in  Series  with  Feeders 
from  Pearl  Street  Station,  18r 

Responsibilities  of  Managers  of  Utility 
Properties,  406,  423. 

Restaurants,  All-Night,  as  Central- 
Station  Customers,  27,  433. 

Return,  Fair,  on  Investment,  63. 

Rice,  E.  W.,  Jr.,  136,  414. 

Roach,  John,  Edison's  Negotiations 
with,  318,  344. 

Rocky  Mountain  Region,  Rates  for 
Hydro-Electric  Energy  in,  464. 

Roentgen,  W.  C.,  113. 


Rotary  Converters,  Central-Station 
Use  of,  23,  321,  353,  418. 

Rotary  Converters,  First,  in  Brook- 
lyn, 353. 

Rotary  Converters,  First,  in  Chicago, 
321,  353. 

Rural  Districts.  (See  Country  Dis- 
tricts.) 

Rural  Illinois,  Electrical  Possibilities 
of,  377,  383. 

St.  Joseph  River,  Hydro-Electric 
Development  on  the,  403. 

St.  Louis  N.  E.  L.  A.  Convention  of 
1910,  Address  at,  144. 

St.  Paul  and  Minneapolis,  Cheap 
Power  Helped  to  Develop,  404. 

San  Francisco,  Electric-Service  In- 
come and  Output  in,  462. 

San  Francisco  and  Vicinity,  Annual 
Income  in,  from  Sale  of  Electricity, 
460. 

Sanitary  District  of  Chicago,  60,  62, 
340. 

Sargent,  Frederick,  241,  335,  354. 

Satisfy  Your  Customers  (Speech  at 
Byllesby  1911  Dinner),  174. 

Saturation  of  the  Dollar  Invested  with 
the  Electrical  Energy  Produced, 
437,  468. 

Saturation,  Point  of,  in  Chicago  Elec- 
tric Service  on  1912  Basis,  330. 

Saving  to  be  Effected  by  Utilizing 
Diversity  of  Demand,  134,  292, 
355,  382. 

Savings  of  Efficiency  Go  to  Customers, 
193 

Savings  Fund  of  the  Commonwealth 
Edison  Company,  160,  237. 

Schenectady  Works,  xxxi,  318. 

Schuchardt,  R.  F.,  316  (n.) 

Scrapping  of  Small  Plants,  439. 

Scrapping  and  Stability  of  Invest- 
ment, 443. 

Scrapping  Uneconomical  Machinery, 
73. 

Securities  of  Edison  Companies  Desir- 
able Investments,  3,  21,  340. 

Securities  of  Electric-Service  Proper- 
ties, How  to  Judge,  438,  441. 

Securities,  Electrical  (Address  to 
Investment  Bankers,  1913),  427. 

Securities,  Electrical,  Should  Repre- 
sent a  Stable  Investment  (Vander- 
lip),  227. 


INDEX 


493 


Securities,  Issuance  of,  119. 
Securities,  Paper,  441. 
Securities,  Watered,  442. 
Securities.      (See    also    Bonds    and 

Prior  Lien.) 
Self-Reliance,  236. 
Sell  Your  Product  at  a  Price  which 

will  Enable  You  to  Get  a  Monopoly 

(Byllesby  1910  Convention  Speech), 

116. 
Selling    Electrical    Energy,    Making 

and,  The  Larger  Aspects  of  (Briar- 
cliff  Speech  of  1909),  73. 
Selling  Engineering,   428,   432,   434, 

467,  469. 
Selling,  Proper  Methods  of,  150,  351, 

410,  438. 
Service,  The  Best  of,  at  the  Lowest 

Possible  Price,  182. 
Service,   Continuity   of,    Importance 

of,  194. 
Service,   Electric,   What,    Means   to 

Chicago,  331. 
Shorthand  Clerk,  The,  xxx,  103,  335, 

347. 

Siemens,  Werner  von,  and  the  Three- 
Wire  System,  17,  348. 
Siemens,  Werner  von,  Work  of,  104, 

176. 
Siemens,  William,  on  Subdividing  the 

Electric  Light,  11,  12. 
Siemens  &  Halske,  Early  Work  of,  22, 

110,  176,  350. 

Single-phase    Operation    of    Three- 
phase  Generators,  291. 
Sleepy  Private  Secretary,  A,  and  a 

Friendly  Policeman,  345. 
Small  Central-Station  Plants,  General 

Principles  Apply  to,  74,  116,  129, 

412. 
Small  Communities,  Electricity  for, 

380,  383,  412,  426,  439. 
Small-Town  Generating  Stations  are 

Bound  to  Disappear,  439. 
Smith,  Byron  L.,  316. 
Smith,  Ernest  P.,  159. 
Smoke  Abatement  Commission,  185. 
Socialism,  Municipal,  Creation  of  a, 

42. 
Sociological   Aspects   of   Widespread 

Unification  of  Electricity  Supply, 

380,  390,  395,  396,  402,  413,   425, 

474. 
Sockets,  Wooden,  of  the  Early  Days, 

345. 


Soil,  Fertility  of  the,  Electricity  and, 
223  (De  Ferranti),  231  (Steinmetz). 

Sothman,  P.  W.  (Electrification),  314. 

Specialists  hi  the  Manufacture  of 
Electrical  Energy,  154,  214. 

Sprague,  Frank  J.,  Ill,  125  (n.),  393. 

Sprague,  Frank  J.  (Electrification), 
255  (n.),  310,  312,  313,  315. 

Sprague,  Frank  J.,  and  the  Sunbury 
Station  (1883),  xxxii  (n.). 

Square  Deal  for  the  Public,  A  (Van- 
derlip),  228. 

Standard  Oil  Decision  of  Supreme 
Court,  244. 

Standardization,  Cost  System  of 
Rates,  and  Public  Control  (N.  E. 
L.  A.  Presidential  Address  of 
1898),  34. 

Steam  Engineering,  Wretched,  of  the 
Early  Days,  348. 

Steam  and  Hydro-Electric  Produc- 
tion Compared,  201,  404,  462.  465, 
469. 

Steam  Turbine  and  the  Economical 
Production  of  Electrical  Energy, 
52,  113,  137,  149,  208,  353. 

Steam  Turbine,  Original,  of  Fisk 
Street  Station,  321,  354. 

Steam  Turbine.  (See  also  Generat- 
ing Units  and  Turbo-Generators.) 

Steel,  Iron  and  Brass  Works,  Elec- 
trical Requirements  of,  452,  455. 

Steinmetz,  Charles  P.,  474. 

Steinmetz,  Charles  P.  (Electrifica- 
tion), 808. 

Steinmetz,  Charles  P.,  Speech  of,  at 
De  Ferranti  Dinner,  228. 

Stephenson,  George,  392. 

Stepping  Stones  of  Central-Station 
Development  through  Three  Dec- 
ades (Brooklyn  Speech  of  1912),  342. 

Stillwell,  L.  B.  (Electrification),  309. 

Stockyards  and  Meat-Packing  In- 
dustries, Electrical  Requirements 
of,  457. 

Storage  Battery  (1881),  110. 

Storage  Battery,  Use  of  the,  in  Cen- 
tral Stations,  4,  25,  58,  321. 

Stored,  Electricity  Cannot  be. 
Economically,  433. 

Storer,  N.  W.  (Electrification),  314. 

Stores  as  Central-Station  Customers, 
26,  59,  140,  432. 

Stott,  H.  G.  (Electrification),  312. 

Street  Railway.     (See  Railway.) 


494 


INDEX 


Subdividing  the  Electric  Light,  10, 11, 
48,  107. 

Submarine  Cable  Tolls  (1881),  106. 

Submarine  Cables,  125,  393. 

Substations  in  Electric-Service  Sys- 
tems, 51,  148,  176,  in,  321,  400. 

Suburban  Railroad  Traffic  and  Elec- 
trification, 264,  289. 

Suburban  Railroad  Traffic.  (See 
also  Railroad  and  Railroads.) 

Sunbury,  Pa.,  Station  of  1883,  xxxii 
(n.). 

Sunny,  B.  E.,  104. 

Supply  Dealers  and  N.  E.  L.  A.  Com- 
pany Sections,  190. 

Supply  Dealers,  Thanks  Due  to  the, 
145. 

Supply  Dealers  of  Thirty  Years 
Ago,  105. 

Supplying  the  Energy  Requirements 
of  the  Community  (City  Club 
Speech  of  1912),  338. 

Surplus  Set  Aside  Partly  from  the 
Work  of  the  Selling  Engineer,  467. 

Swamp  Drainage,  Electricity  and, 
373. 

Swan  and  Edison  as  Inventors,  xxxviii, 
11. 

Swing  Maximum  in  Railway  and 
Railroad  Operation,  90,  291. 

Switches,  Enormous,  of  the  Early 
Days,  345. 

Switchboard,  Early,  in  Adams  Street 
Station,  Chicago,  320. 

Switching,  Railroad,  Electrical  Re- 
quirements of.  (See  Freight.) 

Tait,  Frank  M.,  406. 
Tantalum  Lamp.     (See  Lamp.) 
Taxes  and  Municipal  Compensation, 

45,  97,  163,  243,  326,  332,  407,  466. 
Taxpayers'    Money  Should   Not   be 

Used  to  Further  Economic  Waste, 

339,  384,  407. 
Telegraph,    Electric,    Invention    of, 

124,  220  (De  Ferranti),  392. 
Telegraph  Tolls  (1881),  106. 
Telegraphic    Inventions    of    Edison, 

14,  250. 
Telephone    Exchanges    and    Offices, 

Electrical  Requirements  of,  457. 
Telephone    Industry,    Statistics    of, 

113. 

Telephone,  When  the,  Was  a  Curios- 
ity, xxv,  104,  125. 


Telephonic  Inventions,  Edison's,  14, 
105. 

Terminology  of  the  Electrical  Art,  xxii. 

Tesla,  Nikola,  112. 

Thomas,  Percy  H.  (Electrification), 
313. 

Thomson,  Elihu,  107,  111,  123,  393. 

Thomson,  Elihu,  Presentation  of  the 
Edison  Medal  to,  123. 

Thomson-Houston  Electric  Com- 
pany, 1  (n.),  6,  50,  123. 

Thomson,  William.     (See  Kelvin.) 

Three-Wire  Generating  Stations, 
Early,  xxxii,  51. 

Three-Wire  System,  Edison's,  16, 
111,  148,  347. 

Tillotson  &  Sons,  106. 

Town  Light-and-Power  Require- 
ments in  Illinois,  366. 

Townley,  Calvert  (Electrification), 
313. 

Trained  Men,  The  Demand  for,  397. 

Transformers,  House-to-House,  21. 

Transformers,  Improvements  in,  418. 

Transmission,  Electrical,  23,  112, 
148,  176,  352,  878,  400,  415,  474. 

Transportation,  Cheap,  and  Cheap 
Energy,  339. 

Transportation  Facilities  and  Civil- 
ization, 393. 

Tubes,  Edison.     (See  Edison.) 

Tungsten  Lamp.    (See  Lamp.) 

Turbo-Generators,  Large,  Develop- 
ment of,  138,  149,  177,  418. 

Turbo-Generators.  (See  also  Gener- 
ating Units  and  Steam  Turbine.) 

Turnover,  Annual,  in  the  Central- 
Station  Business,  127,  197. 

Twenty-Seventh  Street  Station,  Chi- 
cago, 320. 

Two-Rate  System  of  Charging,  128,  41. 

Underground  Cables,  De  Ferranti's 
Early  Work  with  (Steinmetz),  229. 

Underground  Work  (1880),  16,  49, 
107,  343. 

Unification  of  Electricity  Supply, 
Widespread,  Sociological  Aspects  of. 
(See  Sociological.) 

Unified  Electricity  Supply  in  the  State 
of  Illinois,  Possibilities  of  (Com- 
pany-Section Meeting,  1913),  399. 

Unified  Electrification  of  Railroad 
Terminals  Proposed,  282,  283,  284, 
285,  286,  304. 


INDEX 


495 


United  Electric  Light  and  Power 
^  Company  of  New  York,  261. 

United  States  Census.  (See  Cen- 
sus.) 

United  States  Government.  (See 
Conservation  and  Hydro-Electric.) 

United  States  Steel  Corporation's 
Welfare  Work,  407. 

Universal  Application  of  Electricity 
(De  Ferranti),  219. 

University  of  Illinois,  1913  Address 
at,  392. 

Utilities.    (See  Public.) 

Vail,  Alfred,  and  the  Telegraph,  124. 
Valleys  in  the  Load  Curve,  Filling 

the,  433. 
Value  of  Your  Own  Concern,  Know 

the,  198. 

Vanderlip,  Frank  A.,  95. 
Vanderlip,  Frank  A.,  Speech  of,  at 

De  Ferranti  Dinner,  226. 
Vehicle  Load,  Influence  of,  on  Load 

Factor,  268. 
Vehicle  Traffic  in  Cities,  Electricity 

for,  Edison  on,  251. 
Vehicle.    (See  also  Garages.) 
Villard,  Henry,  xxxi. 
von  Siemens.    (See  Siemens.) 

Wage  Account  of  Less  Importance 
than  Interest  and  Depreciation, 
194. 

Wallace,  William,  Influence  of,  on 
Edison's  Electrical  Inventions,  15. 

Waste,  Economic.    (See  Economic.) 

Waste  of  Money  Avoided  by  Monop- 
oly, 183,  340,  442. 

Waste  of  Time  by  Employees,  What, 
Means,  332. 

Watered  Securities,  Regulation  a  Pro- 
tection against,  442. 

Water  Power.  (See  Conservation  and 
Hydro-Electric.) 

Water  Pumping,  Electrical  Re- 
quirements for,  368. 

Watt,  James,  392. 

Welding,  Electric,  111. 

Welfare  of  Employees,  193,  406. 


Welfare   Work,    The    Final   Test   of 

(New  York  N.  E.  L.  A.  Conven- 
tion of  1911),  193. 
Welsbach  Gas  Burner,  32. 
Western  Edison  Light  Company  of 

Chicago,  177. 
Western  Electric  Company,  xxxv  (n.), 

105. 
Westinghouse  Electric  Company,  50, 

148,  176,  350. 
Westinghouse,  George,  Work  of,  126, 

176,  393. 

Weston,  Edward,  393. 
Wheatstone,    Sir    Charles,   and    the 

Telegraph.  392. 

Whitney  Syndicate  of  New  York,  84. 
Wholesale    Customers,    Diversity   of 

Demand  of,  450. 
Wholesaling   of   Electricity,    52,    59, 

65,  84,  93,  169,  207,  218,  352,  421, 

429,  432,  450. 
Williams,  Arthur,  353. 
Winter   and    Summer    Total-Output 

Curves,  56. 
Wire,  Insulated,  of  the  Early  Days, 

354. 

Wireless  Telegraphy,  113,  393. 
Wiring,  House,  Expense  of,  31. 
Wiring,  Standardization  of,  38. 
Wood,  B.  F.  (Electrification),  309. 
Working  Population,  Cheap  Energy 

and  the,  380,  390,  396.  403,  474. 
Wright,  Arthur,  and  Others,  Dinner 

in  Honor  of,  215. 
Wright  System  of  Rates,  41,  217,  351. 

X-Rays,  Discovery  of,  113. 

Yankees,  Unfortunate  Result  of  Asso- 
ciating with,  108. 

Young  Engineers,  Advice  to,  29,  151, 
397. 

Young  Men,  Advice  to,  xxi,  29,  151, 
202,  252,  332,  334,  356,  397. 

Y.  M.  C.  A.  Speech  (1914)  in  New 
York,  445. 

Zeitgeist,  The,  and  the  Central- 
Station  Industry,  xix. 


PRINTED,  WITH  THE  EMPLOYMENT  OF 
CENTRAL-STATION  ELECTRICAL  ENERGY, 
BY  R.  R.  DONNELLEY  A  SONS  COMPANY 
AT  THE  LAKESIDE  PRESS,  CHICAGO,  IN 
APRIL,  1915. 


OEO 


University  of  California 

SOUTHERN  REGIONAL  LIBRARY  FACILITY 

405  Hilgard  Avenue,  Los  Angeles,  CA  90024-1388 

Return  this  material  to  the  library 

from  which  it  was  borrowed. 


MAY 


3RLF 
2  W^EK  LOAN 


MAW  1 

SH 
2  WEE 


OCT  061997 


0  6  1997 


i  1997 
LF 
LOAN 


TK 

1191  Insull  - 
I59c  Centraj.- 

station 

electric  service. 


UC  SOUTHERN  REGIONAL  LIBRARY  FACILITY 


001  244  354    5 


